Recently, I had the pleasure of sharing ideas about money, savings, mortgages and the like with Mr. John Dallas, Program Coordinator for the East Flatbush office of Neighborhood Housing Services of New York City.

During the conversation, John asked me a question I’d never been asked in all my years of self-employment. “Eustace, as a self-employed person, are you ever afraid?”

Wow. Talk about being leaning into a Joe Frazier left hook.

I told John in all my years, no one had ever asked me such a question. After some thought, the best answer I could give him was, “While I don’t give in to fear, I do enjoy a ‘heightened awareness’ in all aspects of my life.”

“John, several years ago, I sat in my office with some friends, just shooting the breeze, you know, talking about the economy, business, what we were doing to increase the amount of business we had while keeping our current clients happy.  Everyone in the group was an entrepreneur, responsible for their own financial success.

“As I think back on our conversation that day, one thing stands out: Not one of us was boo-hooing about the economy. Instead, we focused on giving each other good business-growing ideas. In some cases, we exchanged leads, and promised to make introductions to other professionals who could be a source of help.”

“At one point several of us jokingly questioned our lack of intelligence for not having gotten one of those “safe” jobs decades ago, especially those of us who would be near the once-normal retirement age.” As we laughed about that, I stated that for many current and soon-to-be-retirees, the future was actually quite bleak.

Retirement Realities

“Increased inflation during their working years left their hard-earned pensions inadequate for the new financial reality of increased rents, and having to purchase Medicare Supplement coverage to fill the gaps in their health insurance. And, even if they own their own home, increased real estate taxes and utility bills will become an increasing burden at a time in their lives when, for the most part, their income will not increase each year.

“Many of these good folk are facing retirement and still have mortgages. Why? They fell prey to the siren song of refinancing during the years of mortgage madness. They used their hard-earned equity for new cars, vacations, window treatments and college educations for their children. They thought the gravy train would still be rolling down the tracks.

“They never thought it would dry up. And just imagine the financial calamity should the IRS send everyone who refinanced their mortgage a letter asking them to provide, in detail, how they actually used the money they got from refinancing. If they can’t prove they used these funds for the purchase of a property or the improvement of an existing property, and deducted the interest on Schedule A, Schedule E, or a combination of both, they violated income tax law.

“And John, everyone deducted the interest. In many cases, it was the only way the new mortgage was affordable.

“They forgot the story of the three-legged stool we all sit on in retirement. One leg is  income from Social Security, the second is pension income, and the forgotten third leg is personal savings. Just try to balance on a two-legged stool and chances are you’ll fall on your rear end every time.

“You see John, everyone forgot about the third leg. We were too busy cruising, travelling, eating out instead of in, purchasing big-screen tv’s to watch cable and dish programs which added no value to our lives, the newest ‘smartphones’, cellphone packages costing megabucks, and buying clothes which were too expensive and in many cases, never saw the light of day.  And shoes, don’t talk about the shoes.

“John, too many people purchased things to make themselves happy. Instead of cash-value life insurance, annuities, mutual funds, or even a simple bank account, they instead put their money in the street in the form of new cars they really couldn’t afford to insure or maintain, and on their backs for all to see.

“As a result, we don’t own the amount of savings we should. And the stool is real shaky.

John, a really good listener, was taking this all in. ” So what,” John asked, “do people like you do differently than others who work for someone?”

I told John that, while in the meeting, one of my friends used a term so profound, it’s stuck with me to this day. “Heightened awareness”, John, “heightened awareness.”

“My friend deemed those who worked for someone “The Normals.” Most of the time, they don’t even know how much is in their checking accounts because they know in a week or two, more money will magically appear to help them pay the bills. They don’t worry about health or dental care costs because they have benefit plans. Their employer provides them with a pension which may or may not keep up with inflationary pressures.

“What many of them lack is the entrepreneur’s sense of heightened awareness. We know how much a toner or ink cartridge costs. How many miles a gallon our car gets. We turn off lights when we’re not in the room, and are loath to use the air-conditioning until a pool of sweat forms at our feet.

“Most importantly, we spend for fun only after we meet our monthly obligations, not before.”

Now John is one of those folk who while employed by someone else, really has the soul of the entrepreneur. And, as many of my clients deal with the realities of debt, before and after retirement, they too are developing the heightened awareness so necessary to financial success.

So I looked at John and said, “My friend, I’ve yet to give you an answer. While I am never afraid, let’s just say I know when to waste time watching a football game, and when to sit down at the desk and send out an email, or prepare for a presentation. I love coupons in the supermarket, and DSW for the shoes my Little Princess needs.

“I know where just about every dollar goes.

“About a year after my fiancée died, our daughter and I were buying the office supplies I needed for the upcoming income tax preparation season. The total came to just shy of $800.00. When the cashier announced the total, my daughter held up her hand and said “Hold up there Daddy. Are you telling me we just spent almost $800.00 and we didn’t have any fun?”

“I looked at her and said, “No, I’m about to spend almost $800.00. And, should the plan reach fruition, this expenditure will enable me to generate the money necessary for the fun we’ll have in the spring and the fall.”

“That day, my daughter received her first lesson in “heightened awareness”, a lesson I’m proud to say she’s never forgotten.”

As our meeting came to an end, John and I agreed we should all work on heightening our financial awareness.

Otherwise, we may crack a hip falling off a two-legged stool.