Hitting financial wake turbulence

Whew, did we hit financial wake turbulence last year!

Many pilots slammed into major wake turbulence in 2020 because they didn’t have a financial flight plan!

As pilots, we train for the "unexpected" so that when something goes wrong in our aircraft, we are ready and prepared. Flight instructors have hours of instruction on how to get out of wake turbulence, but no one teaches us how to recover from hitting financial wake turbulence.

In fact, in most cases, professional pilots get little to no financial education before taking the controls of their aircraft.

It’s imperative that we prepare for the unexpected in the cockpit and in our bank accounts, especially when it comes to financial wealth building. Last year’s downturn was caused by factors well beyond our control....like furloughs and layoffs.

But the devastation in the airline industry and our national economy jolted most households, while others took it all in stride.

What was the difference? Whether or not they had a Success Flight Path for their finances!

The first step to take is to look at your financial flight plan. The first line in any flight planning contains  your departure point – where are you starting from. Financially, this is where you are today – how much do you own, how much to you owe.

Unfortunately, many of us pilots, know more about the performance of our aircraft and less about our personal income and expense statements. Last May, many pilots complained that they couldn’t afford their homes if they had to take a pay cut. Some even sold their house out of fear.

Where are you starting from? Do you have ample savings? Are you in debt? Do you spend less than you make, or have to put essential spending on a credit card each month?

Only after filing your departure airport, does the flight planning ask for your route of flight and then your destination.

If you don’t know where you are going, you can’t possibly plot a success flight path to your desired destination.

Most pilots drift through their career without devoting a lot of thought to where they want to go specifically.

But it doesn’t take much effort to get you going in the right direction.

Small actions matter when taking the compound effect over time. Just take the little effort to take ACTION!

Personally, I think my airline and the pilot union do a pretty good job informing retiring pilots what their options are. But the missing link is in the departure point – no one is there to guide new-hires with what to do with their money.

I’m not going to guide you – you don’t have to take massive action. I’d just like to prod you along to make choices that get you to your desired destination.

A key ingredient in creating wealth is in deciding where to spend your money. As the saying goes: the poor buy things; the rich buy assets.

Unless you are renting out televisions, buying one doesn’t make it an asset.

An asset is something that adds to your cash flow, like a rental property, or a stock that pays dividends, or a profitable business.

A simple, yet powerful exercise, it to track your spending. I’m not asking for a lifetime commitment; just one week.

You can’t change what you don’t track. It’s the same reason we track ETAs and fuel remaining during extended over-water operations. When you track a feature important to you, trends emerge.

Coaches track the performance for world-class athletes; physicians track health progress to determine the most effective medical course of action for their patients; airline executive track a plethora of criteria from on-time performance, fuel prices, aircraft efficiencies and whether or not it pays to serve a meal or provide WiFi on certain flights.

At the end of one week, trends will emerge. Are you using your hard-earned funds on purchases that matter to you? Are you buying disposable things? Or are you buying assets?

Tracking your spending for one week should reveal exactly what your auto-pilot habits have determined to be important to you. Most likely, it will reveal that continuing on that path will guide you to an undesired financial state.

When I started tracking my spending, I discovered several “non-essential” items that kept popping up. I actually stopped spending on a few frivolous items because I didn’t want to take my spending log out and write it down!

Tracking fuel and ETAs while on long flights allows us pilots to make small adjustments to assure our passengers and freight that flight will reach its desired destination.

Without tracking and tweaking, we could end up way off course.

If a flight from Los Angeles to New York makes a 1 percent deviation to the right or left, the flight will miss its desired destination by more than 150 miles and could end up anywhere between Albany, and Delaware!

Same goes for your Success Flight Path. A single poor spending or investing move may not look like much, but it can create momentum in an undesired direction.

You may be miles off course financially when you finally reach your destination when you retire! By then, you may be out of fuel. You may not be able to get back on course.

Here are 5 steps to spend less each day, giving you more to invest in assets!

1) Use a budgeting app - make your life easy and let technology start tracking the numbers for you.

2) Track your bills and expenses and negotiate for the products or subscriptions you want to keep.

3) Bring your own food when possible! That's hard when we're flying all over the globe, but eating out costs Americans more than $9,000 a year.

4) Bring your own coffee. Drinking $3 a day equates to more than $1,000 a year and that's if you drink just one cup! Many coffee shops charge much more!

5) Research your transportation options. It's easy to just call Uber or Lyft, but a couple of weeks ago I saved 15% by taking a yellow taxi!

Each small action compounds in getting you to your destination. Taking even just a small step today will alter your course in the right direction.

To get you started, here’s an easy-to-use Personal Financial Statement, click here

Once you take this first step, then you can get clear on your final destination taking controls so you will never have to worry again about hitting financial wake turbulence again!