Perception vs. Reality

August 02, 2013

I read this article about how we are working fewer hours now than prior generations and we have more “leisure time” than prior generations too. At first, I was thinking that the article was absolutely wrong. I know that I spend way more than the 33.7 average hours per week in this report.  Most of my friends do as well. With our smartphones receiving emails and text messages from coworkers, along with the other technological tethers that many of us live with, it seems like we work all the time. 

But, we are also getting our “leisure time” in as well. I know that I have far more interests and hobbies than I remember my parents and grandparents having. I’m much more active outside of the home than I recall them being.  So, while I work hard, I also play hard. This article seems to indicate that we may not be working (as a whole) as hard as we think we are.

Maybe it’s a matter of perception. The whole perception concept intrigues me. I’ve found some very interesting things in my conversations with people over the last several years.  Our perception of our “place” in the financial hierarchy is often distorted.

Because of that, I work with a financial planner for my own benefit.  She helps me with my financial life and I reciprocate. We give each other an outside perspective that we wouldn’t get flying solo. Even though we “know” what we should be doing, it doesn’t mean that we’re always doing it.

Self-perception/self-awareness is not something most of us are inherently good with. Last week, I talked with a guy that I wish lived in my hometown because I have a feeling we would become very good friends. He exhibits every single financially responsible behavior that I can think of, plus some!   And, he is a great guy as well.

He isn’t even 40 and already has 3 homes that are completely mortgage free, has $0 debt and has over $300,000 in his 401(k) and makes the maximum $17,500 contribution each year.  He also has 18 months of expenses in his savings account in the event that he loses his job. What is funny about perceptions, with him, is that he thinks he should be doing more!  He feels like he’s getting lazy with his finances and wanted me to push him harder on questions about what else he could do in order to be more fiscally sound.

A few hours after meeting with him, I met with someone different who is 20 years older and would like to retire within the next 3-5 years.  He has less than a month’s expenses in his savings account, less than $100,000 in his 401(k) and has racked up $25,000-$30,000 in credit card debt. He also has a mortgage that is roughly equivalent to the value of his home. There is NO WAY that he can retire and live anywhere close to his current lifestyle during retirement.

But, his perception is that he’s like “most of America” and he’ll just figure it out once he’s retired. He thinks he’s fine financially and that is simply a very misguided view of his financial reality. If he were to retire in the next few years, he would run out of money within a year or two, even with his pension and starting Social Security at age 62 just to get income in the front door.

By the end of our meeting, he understood that buying a brand new truck probably wasn’t the best option for him right now.  That was why he came into the office, to discuss ways to finance a cool new truck, even though his current one is only 3 years old and has very low mileage. His perception of his financial reality is as misguided as the ~40 year old guy who could probably retire by age 45 if he wanted to.

What’s the lesson from these two? Don’t trust your opinion of your financial situation. Get a second set of eyes on your financial life.

If you have financial education benefits at work, USE THEM!!!  If you don’t, you can meet with a financial planner (The CFP Board of Standards has a search feature that can help you find a local financial planner) to help you see your financial life objectively. The Garrett Planning Network is another source of financial planners who can help you get a healthy dose of reality in your financial life. Once you understand the reality of your situation, you can then adjust your self-perception and take steps toward creating a secure financial future.