The Ant and the Grasshopper. Fairytale or Financial Planning?

What can this old fairy tale still teach us about financial planning? The ant is someone who is planning for his future, stashing resources and making sure he has saved enough to see him through.

While the grasshopper is someone living each day not concerned about tomorrow. When the future arrives, nothing has been saved and his remaining days are spent cold and hungry.

How can we be less like the grasshopper financially and more like the ant? The first step is to have a long-term goal and a plan to make the goal a reality. A common goal is to have your family home paid for by retirement.

The reasons for this are clear, rent will not be due each month and in the worst-case scenario you can sell the house and live off the proceeds.

The second step is how to make this plan happen? Savings accounts or monthly contribution accounts are definitely a step in the right direction.

Having a separate account to save for a down payment or for additional principle payments each year is a good idea.

Arranging to have a monthly contribution removed from your salary or bank account each month will start the discipline of saving and keep your savings consistent.

Finally, do not use these savings for anything else but the final long-term goal. If there are short-term big-ticket items you want, save for them separately. Do not dip into the saved money to pay for them. Dipping into savings accounts does two things: 1) if you touch it once it will be tempting to touch it again and 2) by using the savings for a near term purchase it will delay or worse forego the final goal of a down payment or paying off the mortgage before retirement.

Most of us spend more time planning our vacation then on our retirement plan.

Take the time to put a financial plan together, make the effort to stick to it and when retirement arrives you will be in your home warm and well fed and not outside in the cold like the grasshopper.