Many times I see clients who, without realizing it, are squandering their wealth potential, both currently and for the future. Many of these clients have spent many, many years working toward a specialty degree (doctors, professionals, lawyers, MBA grads, etc.). They’ve become so used to living on a student budget that when they start to earn a significant paycheck, they treat themselves. And sometimes a treat is nice — we work hard and deserve it. But when these treats start impeding on financial goals there’s a problem. Right out of school, one shouldn’t be spending $60,000 on a car or buying million-dollar homes. The time isn’t right. Once a career and wealth are established then it’s time to start figuring out how to make those wishes a reality. A trusted advisor can add insight to the impact of how living outside of ones means can snowball and can help sort out any financial problems. In most cases, financial problems can be pretty easy to correct with appropriate strategies. But it’s important to break the cycle early, before it becomes an ingrained habit — like spending more than you should over a career’s worth of time — which is harder to break. These ingrained habits, the “keeping up with the Joneses” mentality, start to affect more than just financial well-being. It can ensnare your business contacts and social circles. And since we’re often dealing with habits, we gradually get acclimated to spending certain ways, making it that much harder to break.

Another type of person is what I’ll call a “person of circumstances”— and those circumstances are sometimes not good. They’ve lived for 15 or 20 years with excess cash flow. They’ve become accustomed to a certain budget, and yes, they’ve saved money on the side, but then something happens: business falters, the economy tanks, etc. They now have to find a different job or another source of income, and it’s difficult to find another job. All the saving they thought they were doing wasn’t enough; they still have the groceries to pay for, the house to support, the kids to educate, and the mortgage to pay. It’s a tragedy when an executive or business owner who has lived a nice lifestyle but hasn’t saved enough because they didn’t know how much they should be putting away or assumed their business or company pension would cover their retirement, their world is going to change due to poor financial decisions. It’s jarring for someone in their 50s and their retirements will suffer. This is when having a bit of debt is okay, since it means the ability to save more for emergencies and unforeseen circumstances.

For more information on how to use debt to your advantage, visit tswealth.com.