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This is a continuation on evaluating your financial behavior. See Part I for identifying your goals, gathering your financial records, and getting real with money attitudes.
The backdrop for each step describes what a financial planner would direct you to do; the self-study action is included.
These last three points put the plan in motion.
4) Develop and Present a Recommendation
Financial Planner Action: Communicate a plan, make recommendations, and identify alternative options. At this phase, the financial professional may sense resistance and ambivalence from their client. Financial psychology* suggests engaging the client in dialogue that fosters the client’s positive changes. This method of conversing provokes the client to recap their goals and why the goals are important. Instead of being directed by an outsider, which is typically not well-received, the client feels a sense of empowerment and autonomy.
Self-Evaluation: This is where you decide what changes you’re going to make and is most likely the part where your well-intentioned launch could lie like an unhatched egg. You’ve reached this segment, but your avoidance may kick on. Vacuuming dust bunnies and pulling weeds might look exciting compared to figuring out how to manage your wallet. If you sense hesitancy, acknowledge it, but don’t judge yourself. Identify your resistance and figure out ways around it. You should be sitting on that egg like a stubborn hen, not avoiding it.
In my book, How Ally Found Her Financial Freedom, I take the character through her money mistakes. Most commonly, she wrestles with wanting the outcome but lacks the compass for getting there. She initially rebuffs any suggestion to change, but eventually realizes why it’s important to her and how the turnabout will help her reach her goals. She gradually develops a purpose and seeks options and possibilities that differ from her previous money habits. Within a year, she finds financial contentment and a deep sense of accomplishment.
Here are some ideas:
- Open an IRA account (for deductible or non-deductible contributions),
- Analyze your 401(k) contribution percentage,
- Check your allocation percentages,
- Open a dividend reinvestment plan (DRIP),
- Schedule automatic deposits for a savings or investment account,
- Consolidate leftover 401(k) accounts into one IRA,
- Evaluate all insurance coverage, i.e., life, auto, home, disability,
- Journal all purchases,
- Read a financial book regularly (see recommendations at end of this article),
- Visit Dora’s Facebook page for inspiration
Financial Planner Action: Determine which actions to deploy and which to reject. Homework may be assigned and reviewed.
Self-evaluation: Homework! What?
Put your big-girl or big-boy drawers on and get proactive.
Schedule a list of tasks and a deadline for each. Take it one at a time, maybe one a week. Make them easy and accumulate some finished activities that will cultivate a sense of accomplishment. See the list above.
Don’t make hasty decisions, for example, vet out your investment decisions with research. Conversely, don’t stay stuck in a rut, avoiding progressive changes.
6) Monitor Progress
Financial Planner Action: Schedule follow-up visits to evaluate progress.
Self-evaluation: Schedule dates on your calendar to assess your progress. Set mini-goals in between to work towards your monthly or quarterly benchmarks.
Use the calendar of your choice, whether it’s Outlook or the paper desk version. I live and die by my Outlook calendar and my Smartphone calendar. I can’t possibly remember every appointment and task that I need to do. People are impressed at how diligent I am. Confession: I forget things all the time, but if I use my calendars, they substitute for a personal secretary. The trick is to type in an entry as soon as you know it’s an important item to follow through with. If you wait, you’ll forget to remind yourself (you’ll forget to not forget, get it?). Start entering your financial tasks and target dates now.
It’s a marathon, not a sprint.
Take your time with all phases of the process. Everyone is so busy that it can be tough to imagine tackling even one of these steps, but stay the course. If you think it will take a year, map out each action with a one-year calendar. You will still be here a year from now but by the end of the year, you will have gained a sense of financial empowerment.
Life happens. That’s a fact. If you get tripped up by an unexpected expense (and who doesn’t), shake it off and pick up where you left off. If you can’t save as much as you wanted in a particular month, save the lesser amount. It may not seem significant, but every little bit counts. When you have more breathing room in your budget, treat yourself for being so disciplined.
Stay tuned for more motivation.
* Lawson, Derek R., Klontz, Bradley T., “Integrating Behavioral Finance, Financial Psychology, and Financial Therapy into the 6-Step Financial Planning Process”, Journal of Financial Planning, July 2017.