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.
If you were to sit down with a financial planner, you might expect to state your goals and come away with directions for allocating your money. You might expect to be sold a life insurance policy or have your money transferred to accounts that are under the control of the advisor.
A CFP® follows specific steps to align the client with a sound financial plan. These steps involve establishing a relationship, gathering data, analyzing the current financial status, developing a recommendation, implementing the suggestions, and monitoring the plan.
A comprehensive evaluation of your financial status should integrate your underlying money motives and help you understand how you are managing yourself and your money. This is critical knowledge because you are the only person that will take the necessary actions.
Dr. Brad Klontz is my hero on this topic. Dr. Klontz combines behavioral finance and financial psychology into standard financial planning procedures. He’s the Dr. Phil of finances. If you need help getting real with your finances, Dr. Klontz has your remedy. In case you haven’t made the connection between your behavior and your financial status, read below where I’ll translate Dr. Klontz’s recommendations for conducting client meetings into self-evaluative introspection and actions. If you understand your motives and harness that energy, you will be better empowered to make smarter financial decisions.
Usually I wait until December 31st or January 1st to assess my financial condition.
I ask myself the following questions:
How much have I saved?
Is my money in the right accounts?
Is my retirement account percentage enough?
Do I have a balance in my Flexible Spending Account?
Have I contributed enough to my IRAs (deductible or non-deductible)?
Have I donated as much as I wanted to?
With the blur of the holidays fuzzing out my faculties, I decided that halfway through the year is probably a better time to check my financial diagnostics. By December I don’t remember anything and I don’t have time to fix anything to fall within the calendar year.
This weekend’s activities involved conquering a mountain of laundry and getting to my fiscal monitoring. Here’s a list of things I took care of and recommend:
Because I feel that every aspect of life overlaps with financial success, I feel strongly about a topic that most people don’t consider related. In fact, most take it for granted and neglect it when it needs everyday attention. Here we go: Everyone must take charge of their health. OK, I can feel the collective groan. You mean I have to eat chunks of tofu? Um, no, but it would help to put down the donuts.
Here’s the downside of not managing your health. Feeling like a slug all the time might be a hint. Having minor, chronic discomfort is another clue, whether it be from digestion, skin problems, allergies, or constantly getting a cold.
Here’s my day when I don’t eat right, exercise, or sleep well: cranky, no focus, foggy-headed, lethargic. I can’t read anything beyond a third-grade level and I don’t want anyone near me. After a few days, it’s like I’ve chosen Door #1 to the dark vortex that brings on depression. Eventually, everyone will run from me but I don’t care because all I want to do is lay down.
If my head were to split open, blobs of financial material would spill out. The latest stock prices of Amazon, Veeva, Comcast/how much I plan to save this month/the order that my bills need to be paid to meet my savings plan/ Trump’s tax proposal and his idea of tax rates that are going to enhance working lives/what sector of the stock market is on the verge of growth/how much I plan to spend this month. Small splashes of yoga poses that I plan on attempting might be in the brain matter, but at a minimal level. I gave up on twisting myself into a helix years ago. What I’m getting at is the majority of my mind is focused on financial elements. I realized that most people don’t have a grip on this topic and I had an idea to put it into a book.
In How Ally Found Her Financial Freedom, I take the reader through common financial problems – no idea how to manage money, accumulating debt, little knowledge of financial instruments. Ally is a working professional with no money management skills. She’s deep in debt and wonders why she impulsively spends money. Ally acknowledges that she doesn’t have all the answers and finds a mentor. Cue Victoria, a family friend that Ally feels has the accomplishments and successes that Ally longs for. Victoria commits to her mentor role, providing sound advice and guidance. Ally is compelled to examine how she thinks about money, especially her personal money script. She’s challenged to think about money every day and remain disciplined. Ally takes bite-size actions, baby steps to pursue financial contentment.
We all have one. A money script, that is. Money scripts are underlying behavioral principles that dictate money habits. You know, the ones that cause you to throw caution to the wind when strolling through Bed Bath & Beyond. Surely you needed the extra five kitchen gadgets, especially the one that juices lemons while catching the pits. Money scripts are also responsible for having feelings of jealousy and bitterness hijack your senses at the sight of a Porsche whizzing by.
Based on indelibly etched experiences of life that form each person’s money habits, individuals form impressions of the significance of money and how it affects their life. By absorbing messages from our environment, unconscious impressions about money form lifetime behaviors. Often learned from parents and social settings, a money script based on dysfunctional patterns may lead a person to develop extreme habits like overspending or underspending, running deep into debt, or being so miserly as to forgo basic necessities. While the money script remains hidden in the subconscious, the corresponding behaviors emerge on a daily basis, controlling a person’s actions without the individual understanding the reason for their habits. Continue reading “Money Scripts”
If I wanted to, I could fill this blog with posts of all the basic financial gems like budgeting templates, savings calculators, and mortgage interest rates. Because there’s no shortage of said material, I’d like to talk about one of my favorite sites: Feed The Pig .
Feed The Pig is a National Public Service Campaign sponsored by the American Institute of CPAs and the Advertising Council. The site’s mascot is not the most attractive pig I’ve seen, but stay with me. His head is a piggy bank and that’s where the parallel message lies.
The presentation is meant to appeal to young people, or those that we’ve affectionately labeled the Millennials. Us Baby Boomers would be remiss in our obligation to society if we failed to engage this genre. According to SoFi (www.sofi.com), 39 percent of Millennials would rather disclose a preexisting sexually transmitted disease to a potential partner than reveal how much debt they have.