“You Can’t Always Get What You Want”

Market Update: While this week’s decline in the market is concerning, I believe this is the market’s overreaction to uncertainty.  As measures are put into place to combat the Coronavirus, we’ll find that the market has over-corrected.  The number one thing clients should be concerned with is if their time horizon has changed.  If not, they should never sell into panic. 

Early in our marriage, my wife and I were still learning new things about each other.  We had dated for a year and were engaged for a year, so the early marriage years still required we continued the education process about our likes and dislikes.  Part of that included knowing what we each wanted versus what we might need. 

Of course, we had gone through pre-wedding counseling to ensure we were on the same page.  For the most part we were in sync, especially on the big items like spending, child-rearing, etc.  When it came to gift-giving, we may have skipped a page or two.

I must admit my choice of a vacuum for Christmas probably topped the list of bad ideas.  I felt that she not only needed it, but that she also wanted it.  Uh, nope. Lesson learned.

Phoebe was actually very excited about the gift she got for my birthday.  She thought I would be just as excited.  At the sight of the chest of drawers she purchased in the back of her Saturn, I made a face that couldn’t be described.  I not only didn’t want one, I didn’t think I needed it!  Suffice to say, we’ve gotten better, with some mistakes every so often. We both admitted errors in our selections, although she almost always knocks it out of the park.

When it comes to goals, some are wants, some are needs and some are wishes.  It’s important to make this distinction because it may be impossible to fund all the goals desired.  Trade-offs must come into play.

Most people have multiple goals with different time spans.  One of the biggest trade-off’s clients with children face is college funding versus retirement savings.  Most parents feel an urgent responsibility to pay their child’s college tuition.  While this is admirable, it may be misguided.

There is a major assumption here and that is that both goals are inevitable.  Nothing could be further from the truth, especially in light of the student loan debt crisis that is unfolding.  In the political arena, the idea of debt forgiveness and free tuition is getting a lot of press.  The pressure to do something will only continue as more young adults fall into debt.  We may see new market driven programs that will help drive down college expenses.

College enrollment is slightly down in 2017 from 2010. (see: https://nces.ed.gov/programs/coe/indicator_cpb.asp) It remains to be seen whether the debt crisis will reflect in future enrollment numbers.  Regardless, it is sparking kitchen table conversations about alternatives.  Community colleges, technical schools are all being considered. 

The point is at the birth of a child, no parent knows what will unfold over the next 18 years.  What clients can be certain of is that they will eventually stop working.  So, what’s the solution?  While it all depends on everyone’s situation, for the most part, I would first solve the retirement problem.  Why? Because if you haven’t funded your retirement goal, who is going to?  The college kid that just graduated? Unlikely.

As with most financial planning scenarios, it’s wholly dependent on your specific situation.  If you are in the enviable position of being able to fund both goals that’s fantastic.  If not, it’s best to sit down with a planner to talk through the situation.   

Depending on your age and time horizon, it may be possible to dial up your retirement savings while funding the college goal in the near time.  Or you may recognize retirement savings needs to be prioritized over college savings.  A CERTIFIED FINANCIAL PLANNER ™ professional can coordinate this conversation.

If you would like to learn how an independent, fee only advisor can help you, please contact me.  Feel free to share with others and make suggestions for future articles: peter.oneill@fiduciamwealth.com