When considering a Donor Advised Fund, there should be a balance between aggressively funding your giving goals to save money on taxes and assuring that your other financial goals are being met as well.
In the past two posts I’ve been writing about my client Evelyn, who recently experienced one of life's major transitions. In this final post, Evelyn has more advice for what can be a difficult period for some people.
When deciding what she wanted for her elderly years, Evelyn compared options and consulted her children. “There’s been a lot of growth and what has been so crazy about it is my kids have loved it.” Evelyn notes that at first her son, in particular, was concerned about her decisions. “'Oh dear, she’s moving to a retirement center, I may have to take care of her.' That’s what scared my son.”
After discussing a possible move out of state to be near her kids and the eventual retirement community she chose close to where she currently lived, her children saw she was making the right choice. While she wanted to consult with them, she made it clear she was going to be independent.
Her advice for other retiree’s children is not to take decisions away from their parents. She notes that fortunately, her children have strong boundaries.
“I must have done something right. They didn’t come and get me [when she was sick]. They didn’t make me move to Memphis. They never thought they had to take care of me. They knew I could do it. And it’s really made them happy that I’ve done this on my own. I’m just really grateful my kids are independent and they know that I [am] going to be independent.”
To those who may be looking at a similar transition within a few years, Evelyn advises, “take your time. Get to know yourself really well. Know what you want.”
Getting to know yourself to Evelyn means, “getting down to my true self. Letting go of what a lot of what the world says you need to be. And I think that comes a lot with aging. A lot of that is about not having to live up to expectations. “
Another thing Evelyn chose to do was “not compare myself to my friends. No matter how much money you have, there will always be people who have more money than you do. That doesn’t matter. You have to figure out what is right for you and just do it.”
This was especially important as she set a budget. “I’ve always had a budget, but when you aren’t making house payments anymore, there’s so much that [is] there.” Although Evelyn was aware you shouldn’t spend more than you take in, she had to grasp the fact that “when you retire you are already spending more than you take in.”
Evelyn credits You Need a Budget with helping her get her expenditures under control. “It helped me get my entertainment budget in line…to decide how much I needed, what entertainment I wanted to do and what was right for me. Just because my friends did it, didn’t mean that I had to do it.”
Evelyn is looking forward to the continuation of things she’s always done, like finding a way to teach, and exploring writing and art. She is also excited about meeting people in her new community. “The possibilities are endless.”
While a retirement community might not be right for everyone, there are lessons to be learned from Evelyn’s experience. Soul-searching, research, consulting with family and facing the future bravely can make a big difference in easing what can be a time of turmoil. It’s up to us to look at any transition as a new adventure with new opportunities. We can either languish and fade away or we can choose to bloom.
This is the second part of my interview with my client, Evelyn, a 73-year-old divorcee and retired high school teacher, who is going through a new transition. In my last post, we touched on Evelyn’s decision to move to a retirement community. In this post, I want to share more of Evelyn’s thoughts on what helped her make this decision. One of the resources that has helped Evelyn is a book called The Gift of Years: Growing Older Gracefully by Joan Chittister. In the chapter titled Adjustment, Chittister says, “A burden of these years is that we must consciously decide how we will live, what kind of person we will become now…how alive we intend to be.” Evelyn echoed this: “This has been an extremely interesting part of my life. It has been a real growth process. I’ve learned more about myself.”
She notes that the transition to retirement was modeled by the women in her life. “I started early. My mother had moved into a retirement center when my father died. She had flourished there. It was really good for her. My model before that even was my grandmother, who had moved into a retirement community and she flourished. She had regular meals and got dressed up every day. There were people that she had known all her life and they were there. There were classes she took – she was very creative. That was my model of what you did when you retire.”
These examples served Evelyn when several things happened that led her to think about her own transition.
“It was critically important for me to maintain my house. I knew I didn’t want to live here if I couldn’t maintain it. My house is nearly 60 years old, there’s stuff that is going to happen and so it was like, it’s never going to be in any better shape than it was.”
Besides realizing it was the right time to sell her home, another factor was Evelyn’s health. “After I was really sick this fall, I realized that I wanted to be somewhere that if I wanted to go to the doctor, I didn’t have to depend on a friend to take me there.” Having convenient access to medical care became an important consideration to Evelyn.
And so Evelyn began to look at her options. She had always assumed she would rely on her children at this stage of life and considered moving to Memphis to be near them. After looking at living arrangements there, she realized that it would be much more expensive and nothing would be familiar. At that point, Evelyn realized that she didn’t need or want to rely on her kids. “I had to realize that I don’t want them to do this. I had to be really grounded in reality and know that I wanted to take care of myself for the rest of my life. And when I was unable to care for myself, the money [would be there] for the assisted living. That was part of my legacy to them.
“The good part of looking and slowly coming to terms with this was that I began to [consider] what was important to me. I can remember saying to my daughter, I can give up space. As long as I have a place to go outside, I can have just a few pots to put my geraniums in and my pansies in the winter.” Evelyn’s other criteria was that it be light with outside views.
Upon visiting a local retirement community, Evelyn knew it was the right place. “When I saw this [retirement community] and it was a price I could afford…and still have the medical care that I need...it was like, that’s it.” After having looked at many other places, “it just felt like home.”
When Evelyn put her house up for sale, she enlisted help to organize her belongings and stage her home. “That part has been helpful.” It was time to decide what to let go of. Evelyn had things taken to her attic and had “one side for sale and [one side for] what I’m going to take. I thought my books would be hard [to give up], but I don’t need that anymore.” As Chittister says in her book, “a burden of these years is the temptation to cling to the times and things behind us rather than move to the liberating moments ahead. A blessing of these years is the invitation to go lightfooted into the here and now.”
Although Evelyn is confident in her decision, she has at times felt conflicted. “There have been some sad times. There was one day last week and it was like, oh my gosh, I’ve lived here for 43 years. Both of my children grew up here, they walked to elementary school, they went to high school. All their friends were here. I’m going away and leaving that, but… I’m ready. Occasionally the sadness hits, but it doesn’t really ever stay very long. It’s more like, alright, this is so good!
“I’ve realized such freedom. It was so clear, but it took some meandering to do it. I know what I want to do and this is it."
Last fall, I asked a 5th grade class via Twitter what they thought the best money advice a financial planner could give was. They sent back the following list:
- Buy things that last
- Separate needs from wants
- Spend money on the things you will use
- Spend money wisely
- Don’t eat at restaurants, they are expensive
Pretty smart kids, those fifth-graders! This week, I got to meet those students in person when I visited their class. The ideas we talked about were simple, but the concepts hold true whether you are a grade school student or well into adult life.
We began our discussion by finding out how the students earned their money. One student said she got money for helping with her siblings, another said he does chores. One enterprising youngster said he helps his grandpa sell horses!
When asked what they spent their money on, one girl summed it up best: “whatever I want!” Oh, to be a fifth-grader again!
The teacher had asked that I incorporate some math into my discussion with his class, and there’s no doubt that a financial planner’s favorite math is compound interest!
One of my favorite quotes says, “He who understands compound interest, earns it, he who doesn’t, pays it.”
Interest was a new concept to this class. I began by explaining mortgages. It made sense to the students that a bank would want something in return for loaning money to someone to use for buying a house or a car. It was a logical conclusion then, that if they were going to invest money, they would expect something back (interest), just like the bank would.
Next I asked them how much money they would have at age 55 if they saved $50 per month starting now (at age 11).
They determined they would have $26,400 ($50 x 12 months = $600 x 44 years = $26,400); a tremendous amount of money to these eleven-year-olds!
We started working through the math, calculating how much they would have if they invested the $50 per month, every month, for one year and earned an 8% interest rate. The math problem looked like this:The idea that you could make almost $100 in two years without doing any extra work was exciting to these students. However, they still couldn’t see just how impressive compound interest was. So I tried to show them the bigger picture by demonstrating how much the investment and interest added up to over the years.
The class guessed that with compound interest they would have a number close to double what they would have saved at $26,400. But we did the math, finding out that if they would invest $50 per month (or $600/year) at 8%, they would have $214,169 at age 55, over eight times as much money as they would have saved by putting the money in a checking account.
Of course, when you invest in real life, the return doesn’t happen in the same linear way we figured out the math above. As we all know, actual investing is much more volatile and goes up and down by the minute. But the basic principle remains the same: investing and earning compound interest over the long term will multiply your initial investment exponentially. It was a dramatic illustration to fifth-graders, but can be applicable to whatever stage of life a person is in.
I enjoyed my personal finance lesson with those bright and earnest kids, but I’ll leave it up to someone else to teach the lesson about the hazards of spending money “however I want”.
As I’ve been examining why I have been resistant to goals, I have started re-thinking how I approach them, and I’ll tell you why. A goal is a clearly defined personal objective, something you want to achieve in a specific time period. What I have recently realized is that there are different types of goals; not all goals are equal nor should they be executed in the same way.
Just as you wouldn’t train for a sprint the same way you would train for a marathon, different goals will require different approaches.
There are three main types of goals: short-term, long-term and on-going goals.
During college I went through several intense, short-term goal periods. One particular summer, I regularly worked 80+ hours per week to pay for my fall tuition bill. I taped a goal meter on the wall next to my bed with the exact amount that I needed by the end of that summer marked on the top of it. Every time I earned a paycheck from my various jobs, I would take a red marker and draw in how much closer I was to my goal.
As the summer wore on and I wore out, that meter served as motivation. It prompted me to pick up another shift or not spend money. It was a constant visual reminder of my goal and exactly where I was on my way to achieving that goal.
That lifestyle was not sustainable over a long period of time, but it was doable for three months.
Short-term goals, as the name implies, are ones that can be attained in a short time frame. They can be goals that we are willing to dedicate an intense amount of energy to, although not all short-term goals are worthy of that energy. As an added benefit, their relatively immediate results allows us to clearly see how achieving our goals helps our lives.
Motivation techniques, such as a poster on your wall marking your progress, or an inspirational photo, work well for short-term goals. An action plan with specifics allows you to cross items off as they are achieved. Tracking incremental advancements can serve as motivation to keep going. Remember to keep day to day goals realistic, otherwise, you won‘t feel you are making progress.
A word here about accomplishment: as I said in my previous post, I have come to realize the wisdom in pausing to breathe as part of the goal setting cycle. Resting after completing a goal allows reflection on your accomplishment, gives perspective and re-energizes you for the next task.
Retirement is a long-term goal for me and my husband. I know that we need money saved, but because I haven’t formed specific plans for retirement, I don’t know what that will mean for us.
I can imagine the type of life we would want to live, but because there are so many unknowns, it’s next to impossible to anticipate the budget we will have. Even people who are a year or two from retirement often have trouble envisioning what it will look like!
However, just because I can’t clearly envision the specifics of that goal doesn’t mean I shouldn’t be setting a target for it.
Long-term goals are directional. I’m aware of the general direction I need to go to reach our retirement goal, even though I don’t know the details. I know that saving monthly for retirement now will give me the freedom to make more specific decisions down the road.
Treating a long-term goal like a short-term goal is a recipe for disaster. For a short-term goal, I may look at my bank account daily as a way of seeing if I am I on track. If I were to attempt the same thing for a long-term goal, like frequently checking a retirement account, the process would be frustrating at best.
Another example is a career goal. If your goal is to be in the C-suite of your company, revisiting how you have yet to attain that goal daily, weekly or even monthly will discourage you and set you back.
Long-term goals are the directional goals that you re-visit over time.
After months of spending too much at the grocery store and throwing away far too much food, I decided it was time to get my grocery shopping budget under control again. While that may seem simple to some, it is a goal that requires constant on-going attention and energy from me.
I sit down and plan out our meals once a week. If every meal is planned, I no longer have to decide multiple times throughout the week whether to eat what we have on hand or find an easier/faster option.
If you approach an on-going goal, such as regular exercise or controlling your budget, the same as you do a short-term or long-term goal, you are setting yourself up for failure. Sprinting for on-going goals becomes exhausting and not checking on them regularly makes it more likely that they won’t happen.
Clearly I won’t ever attain perfection in my goal of eliminating all the wasted food in our lives by meal planning. There are going to be successes and there are going to be days where I simply don’t have the time or energy to follow the plan. This is to be expected. Think of on-going goals as behavior training.
An article on the Mind Tools website reminds us that “unless you clearly define exactly what you want and understand why you want it the first place, your odds of success are considerably reduced”. When setting goals, remember the SMART acronym: they should be Specific, Measurable, Attainable, Relevant and Time-Bound.
Next time you set a goal, recognize what type it is (short-term, long-term, or on-going) and the amount of energy or patience that will be necessary. Having clear expectations and awareness of your direction will increase your chances of successfully attaining your goals.
I have struggled with goals lately. As a financial planner, I’m naturally wired to set goals. An integral part of working with my clients is looking at their goals and the financial ramifications of those goals. In fact, some of the most powerful meetings a financial planner can have the privilege of attending are those in which someone realizes that a dream they never thought was possible could actually become a reality.
Goal setting is powerful and necessary. I understand that, but I found myself resisting the idea of setting goals recently. This resistance was unfamiliar and something I simply didn’t understand.
When I don’t understand something, my first response is to try to figure it out. Why was I having an aversion to setting goals for the first time in memory? I had conversations with business consultants, goal-orientated friends and anyone who would talk to me about it. The common theme I heard was that once you achieve your goals, which was where I was at, you reassess and create new goals. It’s the cycle of success: set goals, achieve goals, set new goals, achieve those goals. Lather, rinse, repeat.
I found myself asking – what if I’m content, what if I have everything I want? I have a business I love, my family’s income is comfortable and I’m further along in my career than I could have imagined even a year beforehand. What if I don’t want or need more at this point?
Recalling my conversations about goals, I realized there is a lot of wisdom in being content. The purpose of life is not simply to achieve more, be more and have more.
After recognizing this, I decided to appreciate and enjoy this season of life that I had worked so hard for. I began, for the first time in my career, to allow myself to have slow afternoons and not look for a new designation or training or ways to grow my business.
As I freed myself from the pressure of achieving bigger and better goals, I found that I was resting.
Resting allowed me to focus on my daily life and enjoy my daily routine. Resting meant that my husband and I started spending time together instead of sacrificing that time for future career goals. Resting opened time in my calendar to drop everything for a friend who needed help one afternoon.
Resting has given me a better perspective. According to an article by Ferris Jabr in Scientific American, "downtime replenishes the brain’s stores of attention and motivation, encourages productivity and creativity, and is essential to both achieve our highest levels of performance and simply form stable memories in everyday life." Times of intense, focused work are for a season and are not supposed to be the constant. It’s good to allow periods of time to enjoy our accomplishments, instead of pushing them aside to move on to the next goal, just as it is good to have times of intense work. Besides, life has its ups and downs and different phases. There will be times in my life when I won’t have the luxury to relax; I’m guessing it’s wise to enjoy this slower pace while I have it.
Looking forward, I have several projects I want to start, but happily realize that I’ll be starting from a place of rest rather than a place of exhaustion. I now have the energy and focus to dedicate the time and mental exertion to what needs to be done.
I have come to realize the wisdom in pausing to breathe as part of the goal setting cycle. In fact, I would argue that resting is essential to successful goal setting and accomplishment.
Clients describe the meeting as shocking, even while admitting that they knew it was coming. It’s the financial planning meeting in which we look at their retirement projections to see if they are on track to meet their financial goals.
Some couples have figured it out. They know what they can spend; they live on a budget and have saved enough to be comfortable the rest of their lives. But for other couples, the meeting highlights adjustments they knew they needed to make.
And by adjustments, that can mean dramatic changes in their current lifestyle.
What to do when your lifestyle needs to change?
Get concrete numbers
When you come to terms with the fact that your lifestyle has to change, get concrete numbers. Talking in the abstract about needing to “cut back” is a lot different than knowing exactly how much money you need to be saving every year and what your ending budget number needs to be.
There are important numbers to consider when looking at spending cuts versus retirement dates or goals. If you were to work an extra year or five years, how does that change your financial picture? Often, those changes can have a dramatic effect on what you need to cut back.
Work with a financial planner
There are resources online, but I encourage you to find a financial planner you feel comfortable with and work with them through this process. Besides developing a relationship that aids financial recommendations, they can give you insights based on similar people’s experiences that they’ve worked with. A good financial planner will get to know you personally and offer advice tailored for you and your situation.
A knowledgeable financial planner will also help you identify the other areas in your finances to be aware of, expert advice that will help you should something unexpected happen. One gap in your insurance and an unfortunate incident can destroy your financial plan and everything you are working towards. Obviously, I’m biased, but I truly believe that the investment is worth it.
Identify your values
Knowing your values makes financial decisions so much simpler. It becomes easy to lose sight of what is really important to us, much of which doesn’t require a lot of money, and focus on the extras of life. Living life within your values creates the framework by which you begin to make intentional decisions.
In his New York Times column, David Brooks says it well: “Early in life you choose your identity by getting things. But later in an affluent life you discover or update your identity by throwing away what is no longer useful, true and beautiful.”
Consider Cutting Back Big
Big lifestyle changes are hard. Much of the popular advice you hear these days advocates cutting back on purchases like your everyday latte at Starbucks. While it’s true that small changes can make a difference, those results will be more subtle and long-term.
When you are faced with a lifestyle change, you must put all the options on the table. Some may be painful: downsizing your house, trading in your leased car, looking for another job, moving for a promotion, cutting your annual vacation. However, it’s necessary to consider every way in which you can make a significant change.
Begin Evaluating Every Option
Look at a list of all of your expenses and evaluate every line item. Begin by asking “why”. After evaluating what you money is being spent on specifically, ask why you are choosing to spend money on the items that you are. What are the alternatives? Even when alternative options seem far outside the realm of possibility, still include them. The purpose of this step is not to solve the problem, but to brainstorm every possible solution. Considering options that seem far from what you are willing to do (like trading your car for public transportation), give perspective and bring attention to the luxuries that you have in life.
Below are some examples of line item evaluations:
Car Payment: $650/month
Why am I spending money on this? Because I need transportation!
Why am I choosing my current option? Two cars are more convenient for our family and I’ve always wanted a BMW.
What are the alternatives? Sell it and have one car in the family, sell and buy a nicer car, sell and buy a less expensive car, sell and buy a used car, take public transportation.
How open am I to changing this (or do a scale of 1-10 on how important this is)?
If you were to change, what would be the monthly/yearly cost difference?
Eating Out: $400/month
Why am I spending money on this? Because we need to eat.
Why am I choosing my current option? We enjoy eating at restaurants and it’s convenient.
What are the alternatives? Eating out less, purchasing ready-made meals, personal chef, cooking all meals at home.
How open am I to changing this (or scale of 1-10)?
If I did make a change, what would be the monthly/yearly cost difference?
Begin to make decisions
After you have worked through your line item evaluations and identified what’s important to you, start making decisions.
As with so much in life, these decisions are not easy or clear cut. Every decision is a trade-off. What is right for one family is not going to be right for the next.
Remember to reflect back on why you are making these changes. It takes courage to make big decisions when your lifestyle has to change, but knowing why you are changing can make all the difference in the world.
If you find yourself unsure of your future and aren’t even sure if you need to cut back, I encourage you to consult with a financial advisor and begin the journey to achieving your financial goals.
In my freshman year of college I had to take the Clifton StrengthsFinder assessment. Two of my top five strengths were “Competition” and “Achiever.” Over the years I’ve had to come to terms with the blessings and curses of being a competitive overachiever.
“No matter how hard you tried, no matter how worthy your intentions, if you reached your goal but did not outperform your peers, the achievement feels hollow,” reads the description of the StrengthsFinder Competition Theme.
I have no doubt that my competitive nature helped me all throughout school. It served as a motivator when subjects seemed far from interesting and kept me focused on my education. But after I finished school and completed all my professional certifications, I was left with an emptiness. Without courses, I no longer had a yardstick to measure my success. There weren’t assignments and projects to overachieve on, there were no more “A”s to show or professors to tell me what a great job I had done.
I had to find a new way to compete and achieve. The obvious way to do this was to compare myself with those around me, my peers and friends, but I quickly realized how pointless that was.
Our Financial Perspectives
One of the incredible privileges I have in my career is getting an intimate look at other people’s finances, learning what is truly important to them and observing how they choose to live their lives.
I’ll never forget the conversation I had with one client couple. Their net worth was in the eight figures, and they lived well within their means. At the end of the meeting, they looked at me and said “We know we don’t have that much, but do you think we’ll be okay?”
At that moment I realized that, no matter how wealthy you are, there will always be someone who has more. Someone who has more money, a nicer house, a better education, a better career. Even people with lots of money feel this way.
I’ve worked with families who have far more money than I was raised with and people who have incredibly successful careers. I quickly realized that the happiest people were the ones who weren’t in a financial race. Yes, they had financial goals, but the goal wasn’t to simply make more money, the goal was rooted in a deeper value.
The happiest clients were the ones who knew what was important in their lives and pursued those values rather than simply valuing the accumulation of more money. They knew, accepted and weren’t bothered by the fact that there will always be someone out there with more money.
I’ve also seen people who were miserable in their careers despite making incredible salaries. Some would say they were winning at the comparison game, but losing at life.
Dangers in Financial Competition/Comparison
The very nature of competition is being aware of other people. But there is danger in judging your life by comparing it to other people’s.
It defines what you chase
It becomes far too easy to chase financial goals because you are trying to keep up with those around you, or worse, just because you want to beat someone. Jealousy, competition and keeping step with your social circles become the motivators instead of your core values.
It says where you're at isn’t good enough
Competition runs on the same premise as the advertising industry: that you need more. You need to be more successful and have more money and move faster through your career. Competition can easily sit at odds with contentment.
It defines happiness
Far too often, happiness is found in knowing that we are better off than others. A shallow sense of satisfaction is derived from knowing that when people visit our house, they will be impressed because it is nicer/bigger/better than theirs.
It breeds discontentment
The same is true when you don’t “win.” Comparison can breed discontent when you realize that your home will never compare with others, or that your career path with never result in a salary like your brother-in-law’s. Comparison shifts our focus from our lives to others.
Looking at Comparison in a Different Way
The best example I have of re-framing comparison is my mom. My mom has three daughters-in-law who are incredibly talented and amazing women. She has acknowledged that it would be easy for her to compare herself to them, to always try to play catch up with their beautifully decorated houses and various accomplishments.
One day, while talking with my mom, she said “I decided that instead of feeling insecure about my house not being as nicely decorated as theirs, I was going to be their biggest cheerleaders. I want to be the one leading the way in telling them how incredible they are and showing them off to the people I know.”
What a great perspective.
She continued by telling me how freeing it was when she made the decision to be their greatest supporter instead of subtly comparing herself with them.
How to Avoid the Hazards of Comparing
The first step in redefining the comparison game is to know what you value and the goals that you want to pursue. Know what is important to you.
The second step is to think differently about other’s successes. When you find yourself observing other people’s situations, instead of getting the emotional high or low, stop and think about what values the other person is holding to make those decisions. Are their lives or decisions ones that would fulfill your values? Are your motivations for living the life you have in line with your values?
The third step is to cheer others on. It doesn’t come natural at first, but when you see someone else's successes, be the one to applaud for them. Changing your mindset this way can be liberating and allows you to experience contentment and joy in seeing other’s successes.
I’ll leave you with a practical example of this. Several personal friends have been taking incredible vacations around the world. My husband and I were talking about this recently in light of our values. While we would certainly love to travel overseas, with limited vacation time and managing our budget, we realized that this couldn’t be and wasn’t our priority in life. We decided that instead of taking exotic trips overseas, we’ll be making more trips to South Dakota to visit family. Our values guide us to prioritizing our relationship and our future children’s relationship with their grandparents and extended family.
Yes, we would love to go on elaborate vacations, and we very well might do that someday, but letting our values dictate out choices has fostered contentment. We’re happy with the lives that we have chosen.
Some of my fondest memories growing up include Sunday afternoon lunches with the family. My parents, four brothers, numerous cousins, aunts, uncles and grandparents would all get together to have a home cooked meal and enjoy each other’s company. I don’t have that in Dallas. My future children won’t experience the weekly love, safety and joy my extended family brought to me as a child. I won’t be the aunt that is actively involved in my nieces’ and nephews’ lives and I will continue to miss the birthdays, new babies, basketball games and everything that brought fullness to my life before.
And it is painful. The choices I have made in life have made it impossible for me to be regularly active in my extended family’s day to day lives. This core value, close family ties, a thing that I hold so dear to my heart, is simply not an option for me.
Values are usually thought of in a positive way. We simply need to identify our values, live by them, and then we will be fulfilled and happy. Case closed, end of story.
It simply is not that easy. Identifying our values is important (read more), but what happens when we can't live those values?
This is when values can cause pain. Families who desperately want children and struggle with the deep pain of infertility know this firsthand. Or the parents whose deep desire to spend time with their adult children and grandchildren is met with a lack of interest.
This is the case many times in finances as well. Maybe your goal to explore the world or retire early is hindered by the fact that you liquidated your investments in the 2008 stock market crash and haven’t regained what you lost. The retirement you envisioned continues to be postponed, even though you saved your entire life for this ideal and did everything “right.”
How do we naturally respond to a dichotomy of values, especially when we have no control over them?
We try to ease the pain from the void in our lives by promoting other values. I know a woman whose family moved for her husband’s job. She had to leave behind the home, town and life she dearly loved. Her consolation was choosing the perfect house and throwing herself into decorating to create a stylish new place to call home. This is how she responded to her pain, whether she acknowledged it at the time or not, by compensating for her loss with an aspiration to create a fabulous new home. She replaced her value of living in a place she loved with the value of being surrounded by beauty.
We not only compensate with new values, we compensate financially. It is all too often that I see parents lavishing gifts on their children or grandchildren, wanting to make up for not being able to spend more time with their family.
Instead of facing these hard values issues, we avoid them at all costs. We don’t talk about it. We don’t acknowledge what we really want in life because we know we can’t have it. We hold true to the mantra “out of sight, out of mind.” We pretend that it really isn’t that important or that other things in our lives make up for this loss. We have so much to be thankful for, why would we dwell on what we don’t have?
For financial losses, this is further complicated by our aversion to talking about monetary losses. Psychotherapist Bobbi Emel says this is because of a “lack of social ritual for this kind of grief: We have many rituals for the death of a person: funerals, memorials, sitting shiva, wakes, etc. These customs help us with closure and adjusting to the world without our loved one. But there are no rituals around the loss of finances and the dreams that went with them. We are left feeling unfinished and lost.”
We hold on
With the constant changes of life, sometimes we want to hold on to a time when our values were fully realized or when we had the options we wish we had now.
We don’t want to accept that our lives are naturally changing over time. We may treat people the way we wish they were instead of who they are, or cling to outgrown, but familiar roles, like doting mother or dutiful child.
“If I can just get back to where my investments were in 2007, then I’ll be okay/happy.” We use the past as a measuring stick against our current situation rather than fully realizing where we are today.
What should we do with the values that cause pain?
Grieve the loss
When we desire something and are unable to have it, there is a sense of loss. Whether it’s the loss of a relationship, loss of a dream or loss of an ideal, it deserves to be grieved.
For me, I have to grieve the fact that my life in Dallas will not include the close family ties I cherish and the fact that I will miss seeing my nieces and nephews grow up. Yes, we can argue that there are positives that should outweigh this loss, but when it comes to loss, the positives are not the point. I have a lot to be thankful for, and I am, but I also have a lot of losses that are real, that deserve to be recognized, owned and grieved.
Financially speaking, people need to grieve investment losses as well, even if they’re eventually recovered. It’s more than just a “paper loss”; it can be the loss of a sense of safety, or a sense of control, or confidence in their financial future. These are real losses that need to be addressed, even if the account values have recovered and everything is back to “normal.”
Find ways to creatively incorporate your values into your life
You can experience fulfillment by finding creative ways to incorporate your values into your current life. However, this can be difficult if acknowledging and grieving the loss has not happened first.
If you value spending time with your family, but their busy lives preclude it, explore mentoring or otherwise seek out someone who would welcome you into their life.
If your value is exploration, but you can’t afford to travel, try to connect with people from different backgrounds and countries in your community or visit local groups that offer that diversity and feed your curiosity.
Don’t fall into the “all or nothing” trap. When it comes to values and what really fulfills us, many times there are various degrees in which we can find that fulfillment.
Why not just leave good enough alone? Is it really worth unearthing painful reminders of unrealized values?
Yes, I believe it is. Pain is part of the healing process. It’s worth it, because whether we admit it or not, those painful values can continue to affect our lives, sometimes leading us to difficult situations.
In my own life, if I don’t grieve and acknowledge the losses that have come from my decision to live in Dallas, away from my family, it will affect my relationships with the people I find myself surrounded with now. I may expect my friends to become what my family was to me, subconsciously expecting them to fill that void in my life. It could lead to unrealistic expectations, sabotaging the unique and special relationships I have with them. Instead of trying to re-create an ideal in my mind and plug people into roles that aren’t theirs to fill, I need to be open to a new reality and appreciate the beauty of what I have now.
I see the lingering effects of change or loss in people’s finances as well. People who sold their investments when the stock market crashed and never recouped their losses often make financial decisions out of fear or the same sense of desperation they experienced before. Whether they realize it or not, those feelings become central in their decision making.
Many times financial decisions are made that don’t quite make sense to anyone involved, including the person making the decisions. These unexplained decisions can often be traced back to unmet values or losses that they are trying to compensate for without realizing it.
Reconciling with your new reality
The goal here is simple: don’t ignore or forget unrealized values. Reflect on the impact of the events that led to those broken values and allow them to inform your future decisions without dictating them. Don’t let events that compromised your values defeat you. Learn from them and look for the good. Reexamine what is really important to you and what is realistic in your current situation. While they might be refashioned, you can reclaim values that are central to who you are.
Acting as your own boss and calling the shots while translating original and unique ideas into an income is the epitome of making a living for many people. A friend of mine, thinking her dream was to be an entrepreneur, convinced herself it was the route she should take. One day, I gave her the values exercise I use with my clients. Over the next several weeks, she continued to think about her values and what they meant for her life. She was surprised to realize that her values weren’t dependent on living an entrepreneur’s life. No longer constrained by a standard she felt compelled to achieve, she became open to looking for full time work. While she continues to be self-employed, her happiness is no longer based on the ideal of entrepreneurship, but rather on the principles of her internal values.
All too often, we’re told what our values should be. It can happen as subtly as observing our friends’ lives and desiring what they have, to the blatant advertising we are bombarded with every day in the media. Do we stop to ask if the messages we’re receiving are things we truly want in or lives? Are we chasing what others want for their life instead of examining and focusing on what is most important to ourselves?
I know a woman who found herself envious of an old school mate who frequently posted pictures of her large group of friends and all the activities they did together on Facebook. She thought she was missing out by not having a similar busy social life for herself. Finally she thought to ask herself, “is that really what I want?” She realized how much she prized her time with her immediate family, the deeper relationships she enjoyed with a few close friends, and her alone time that brought her time to reflect. Once she realized what was truly important to her, she could admire her friend’s social life, but as appealing as it looked, recognized it wasn’t for her. She was thankful for the quieter, nourishing one she already had that met her own needs.
It can be an ah-ha moment when you step back and determine what’s most important to you and realize it’s not the same as what the world has been saying you should value.
Living life within your values becomes the framework by which you begin to make intentional decisions. Instead of having financial decisions thrust upon you, you are able to take each decision and view it through the lens of your values.
Does the new promotion encourage time with my family?
Would moving to a new city enhance our sense of adventure or is it an escape?
Would this new volunteer commitment add joy to my life or is another obligation?
Does this school promote the education we desire for our children or is it the easy solution?
Am I buying things because I need or want them?
When values are not prioritized it can lead to a fractured life. People often spend money on a bigger house or a nicer car without putting thought into why these purchases are important to them. Just because it’s a good thing, doesn’t mean it’s the right thing.
When you don’t make the effort to weigh decisions based on your values, you can feel swept away by life, as though you have lost the ability to choose.
Living your life based on your values is not easy. By its very nature, values are different for different people. Being married means two people have to find a common ground for their personal values. Naturally, we want to look to others for guidance, someone who has lived a life we want to live, so we can then walk in their footsteps. We want a template. We want the certainty that living our life by our values will be successful. And many times, that’s simply not possible. Charting your own course and making difficult decisions takes courage.
What does a values-driven life have to do with a personal finance blog?
When I work with clients, there is inevitably a point where I am asked “Will we be able to do XYZ?” In fact, many times that’s the very reason why clients come to me. They want to know what options their finances allow them.
The answer is rarely as simple as a yes or no. This is where values come into play and I have to ask them:
Are they willing to work longer or step into a higher-paying role?
Are they willing to save more and cut the amount they are spending now?
Are they willing to leave less money to their children and grandchildren?
Are they willing to not travel around the world?
Are they willing to live on a tight budget?
These are all value decisions, and conflicting values decisions at that. The reality is that for every financial decision that is made, values are being defined.
The “American Dream” is a prescribed set of values, it isn’t necessarily everyone’s dream. If you strive for someone else’s dream, it stands to reason that you’ll never find your bliss. It’s crucial to identify your personal values and reexamine them frequently. Ask yourself if the life you are living is in harmony or at odds with those values. Making intentional decisions based on what’s most important to you can be liberating and will allow you to have the one thing we can agree that we all want: a happy and fulfilling life.
You'd much more likely be found perusing books on thirteenth century Scandinavian religious poets than caught even walking near the personal finance section in the bookstore. You break out into hives when you pick up a book on money management. You can hardly bear to open, much less review your bank statement. Does this sound like you? Perhaps money is a regular source of stress in your marriage. Or you just avoid talking about money at all costs, yet have a nagging feeling that you should know more than you do. Then there are all the numbers and jargon and fine print.
I admit it. Personal finance is overwhelming.
Everywhere you turn, from friends and news articles to talk shows and internet chatter, there’s differing advice on what you should do. Pay off your mortgage, don’t pay off your mortgage. Invest in this, don’t invest in that. The advice seems to be always changing. Never mind that your life is always changing!
Not only are money matters frequently overwhelming, they’re often filled with “should haves.” I should have known better. I should have known that taking out that credit card was a bad idea. I should have known what to do with my 401k. I should know what a 401k is!
If you feel like a dinghy swirling in a money maelstrom with the winds and tides constantly changing and worrisome misgivings circling like sharks, don’t fret. Calmer waters can be found!
Let’s set some ground rules to go forward.
1. No “should haves.”
Shaming yourself into action just doesn’t work, so don’t do it. The mistakes you made in the past are over and done, it’s time to move forward. Unless you are willing to forgive and be kind to yourself as you move forward, your progress will be limited.
2. Choose to look forward.
Even though I’m a financial planner, I still struggle when I hear the word “budget.” I automatically associate it with chastising myself for spending more than I planned on, for letting my husband down by not following our spending plan.
However, just because that’s where my mind goes, it doesn’t mean my mind stays there. When we discuss budgeting as a couple, I decide that I'm going to look forward instead of worrying about what's done and dusted. You can decided that as well. The past is simply your guidepost. Budgets can give you a perspective on the how you spent, but their true purpose is to look toward the future.
3. Cut yourself some slack.
No matter how organized a person is when they come into my office, it takes everyone time before their money matters are straightened out. The worst thing a person can do is expect to sit down and have their entire financial situation figured out in one hour.
Financial goals take time, much like working out and eating right. The motivation is there at the beginning, but it can slowly fade as time goes by. Accept that you’re going to make missteps and fumble along the way. It’s what you do to get back on track that determines your success. And remember, even just having the desire to understand your finances is a brave first step.
4. Give yourself credit.
Think back in your life. What are you most proud of? What is the greatest challenge you have overcome? Have you pulled yourself together after losing a job and moved forward?
Enduring the death of a loved one, caring for someone who is ill, surviving countless sleepless nights with a newborn baby or making it through a child’s rebellious teenage years are all life experiences that people go through that are far harder than getting your finances in order – I promise you.
You’re still reading. That tells me that you have what it takes to move forward with your finances. It takes courage, but I know you can do it. (Feeling like you lack that courage? Reread Ground Rule #3.)
Now that we have the ground rules in place, let’s talk about some practical steps you can take today.
Pick a (free) online budgeting tool
There are a lot of great sites out there that are free as well as user friendly. Two of my favorite tools are mint and the budgeting tool that comes with our bank (USAA). Personal Capital is another free product ranked as a top financial tool. The goal is to get all of your information in one place, allowing you to easily get an overall picture of your finances.
Worried about having all your financial info in one place? Read this article about the security of online personal finance software.
Set a timer
Decide on a time limit. It could be 15 to 30 minutes. Start with something simple, like linking your online banking to a personal finance tool or simply seeing how the program gives you reports. As you get familiar with the software you'll feel more comfortable using it.
Specify a specific date and time
Schedule a time for next week when you will spend 15 minutes looking at your finances. Nothing more. We’re focusing on baby steps. Make it a goal to sit down with your finances four times in the next month.
Involve your spouse
Talking about money with your spouse can be unpleasant and sometimes even contentious. Once you have one month of expenses listed, bring your spouse into the picture. Have a conversation with them about your spending and discuss if it’s aligned with what’s important to both of you. Be aware that talking with your spouse about money can be difficult (read more about that here and here). Bonus points if your spouse enjoys budgets and will do the first steps for you!
It’s easy to lose track of financial goals. Make them a priority. Put a note in your wallet by the credit card you use most often or stick a picture of that vacation spot you want to travel to on your mirror. The idea is to remind yourself daily to spend money wisely. It’s far too easy to fritter away money in small amounts here and there (that eventually add up to large sums) when you don’t have a financial goal in mind.
You don’t have to manage your finances alone. Find a financial planner to help you work through your financial situation. When you meet with a professional, make sure that you find one that makes you feel comfortable and is willing to work through your situation at your pace (read about how to choose a financial planner here).
Having a plan in place can make you feel like the king of the seas. So relax, personal money management is not as hard as you think. Follow these steps to help you grab that rudder and before you know it you'll be charting a course to financial confidence.
They could have been contestants on The Newlywed Game, their answers revealing how little they were in agreement on matters of married life. She wanted to travel to Europe and experience the finer things in life. He wanted to know how they were going to pay for their retirement and day to day expenses. She was missing out on life and she blamed him. Their financial lives were unstable and he blamed her. You could feel the tension in the room. The meeting could have used the experienced refereeing of a game show host. These conversations are all too common in my work.
Finding consensus with your spouse is one of the most important aspects of your financial life. Financial harmony within a marriage is critical to financial success.
Why is this so hard? It really shouldn’t be, but as many couples know, it is.
Talking about money is threatening
Regardless of financial situation, something about money strikes at the core of who we are. It defines our status in the world, what we can and cannot have. Money is integrated into every area of our lives, whether we like it or not. Even the most basic choices in life, like the shirt you are wearing or what you do for dinner tonight, is the result of a money decision.
There are conflicting values within each of us when it comes to money. For example, will it really matter if you eat out for lunch today? Surely it won’t affect your college savings. Setting aside money is great, but what about spending a little on that trip you’ve always wanted to take? Add another person into the equation and you have all the makings of an uncomfortable, but entertaining game show: the conflicts are endless.
When it comes down to it, we’re not talking just about money, we’re talking about values.
Ok, so these conversations are threatening, but they need to take place. So what do you do about it?
Make the conversation safe
The fastest way to make a conversation not feel “safe” is to start accusing your spouse. Remember, this is a values conversation, not just a money conversation. Neither of you want what is important to you to be minimized or insulted.
The goal of each conversation is to understand your spouse and for your spouse to understand you. Granted, sometimes you may never understand why your spouse has to spend money on that, but realizing it’s important to your spouse allows you to respect their decision.
Practical steps to making the conversation safe:
- Find a time that works for both of you. Trying to have a financial conversation when you are multitasking or concerned about everything else in life will only lead to frustration.
- Know each other’s strengths. If one of you hates math, budgeting can be more difficult. Forcing a spouse who hates math to balance the budget to the closest penny may be the equivalent to torture. Find a middle ground.
- Remember the person you fell in love with. Conversations can be tense, but remember what drew you to your spouse in the first place. If this is your focus, the edge will come off your voice and your spouse will feel the difference.
Establish ground rules
Which topics are off limits or which topics need to wait until the end?
What happens when you or your spouse gets overwhelmed in the details? Does the meeting stop? Do you take a fifteen minute break? Know what your triggers are and plan for them before you walk into the discussion.
Other ground rules may be to limit the amount of time you spend on the conversation. One person may not be able to focus longer than 30 minutes, making anything over that time fruitless.
Some people may want the numbers ahead of time. They may need time to process and think through their feelings before the discussion, allowing them to not feel blindsided in the conversation.
Go beyond the numbers
As you work through your budget, commit to talking about what’s below the surface. Instead of becoming defensive over numbers, share what they represent and why their important. For example,
“This line is important to be because .....”
Being aware and identifying why you are spending, saving or investing your money is incredibly important for yourself and your spouse. You have to lead the conversation to find the underlying issues.
Lower your expectations
You may walk into a financial conversation with your spouse and expect to come to a conclusion by the end of it. Anything short of this may be a failure in your mind. Lower your expectations. Financial conversations are never a one and done type of deal. The first conversation may simply be to identify a problem. Turn your expectations into goals and realize that it may take time before you end up where you want to be.
There’s nothing to lose and everything to gain when you take the necessary steps to open the lines of financial communication with your spouse. While it may be difficult to return to the rosy glow of honeymooners, thoughtful, deliberate conversations about money in marriage can bring you one step closer to wedded bliss.
The last week and a half has been rough for investors. Everywhere you look there is dire market news. Like Chicken Little, it's easy to feel like the sky is falling. Here are my five tips on what to do when the market is taking a downturn:
Turn off the news
I have stopped watching market news, I read it instead. Reading the news takes out the emotion and drama that fills newscasts and sells programming. I've found I am better able to assess what is actually happening in the market and give better advice to my clients when I’m not channeling the fears of talking heads.
Several years ago I happened to be working from home and had the news on in the background throughout the day. Later that evening the idea occurred to me to consider gold as an investment. As the thought passed, I was shocked. That kind of thinking went against all of my education and background. I then realized that every commercial break throughout the day had ran an ad for a company urgently advising investors to buy gold (specifically from their company). It was at that moment that I really started to understand the power that media, even in the form of commercials, has on people.
Work on something you can control
There is absolutely nothing you and I can do to change China’s economy or the interest rates or what the market is going to do today.
I get it; when there’s so much bad news, you have to do something. So try working on other areas of your financials, things that are not investment related. Finish your estate plan that you’ve been meaning to do for years. Revisit your budget and look at how you’ve been spending money. Are your finances lining up with what’s important in your life? Spend your energy being productive by working on what you can control, instead of fretting about things that are out of your hands.
Identify what's important to you
Another popular way of saying this is “know your why”. Why are you invested in the stock market? What are your goals for that money? Many common objectives include ensuring you and your spouse are taken care of in retirement or helping children or grandchildren get through college. Know why you are investing and then focus on that.
Financial contentions are one of the leading causes of divorce in the United States. When the market goes south, it increases the stress in our lives, and many times this stress spills over into marriage and family relationships. Focus on these relationships during market downturns. Don’t become a statistic.
Keep a cool head
Don’t panic. A market downturn may be more serious than an acorn hitting you on the head, but it doesn't help anything to get your feathers ruffled like a certain frantic fowl. Of course, it’s easier said than done. If you’ve had a plan in place, your plan should be working even in a downturn. This is the time to assess if your plan is doing what it should when the market takes a dip.
Remember, there are seasons to everything and the season of this market downturn will pass like all the others. One of my favorite analogies of the stock market is pruning a fruit tree. In order for a fruit tree to grow and produce healthy fruit, it has to be cut back every year. It cannot grown untended and expect to be a healthy, mature tree for years to come. The same is true with Wall Street. Corrections and downturns are healthy for the stock market. They cause investors to reassess companies and filter out bad investments. Pruning is a painful process, but it is necessary.
Buy, buy, buy
Market downturns are the perfect opportunity to invest. The stock market is essentially on sale at times like these. Of course we don’t know where the market will go tomorrow, but when the markets return, whether that be in one day, one month or five years, you will have benefitted from taking advantage of the reduced prices.
Wealth is made by decisions made when the market is down. The investors who stay in the stock market and continue to invest, even when the news is bad, are the ones that will find the most success and end up wealthy.
If you haven’t followed these guidelines in the past, or even during the current market correction, I have specific advice for you. Think about what you would want to do differently next time. What will you wish you had known? Why was pulling out of the market a bad idea? What would have happened if you would have stuck it out?
Write a letter or note to yourself about what you wish you would have done in the past. Date it and keep it. Read it again when the market goes down to remind yourself of what you wish you had done differently. Even better, share this information with your financial advisor, your spouse or a close friend. Let them help keep you accountable.
One of the most important elements of investing is what you do or don’t do when the market falls. Making wise decisions now allows you to enjoy success in the future.
The Bloomberg article on Monday, August 24th leads with the line: “Panic. Judgment Day. Carnage. Meltdown. Fearful. Depressing. Psychologically Draining. Wired.” These are words money managers used as they tried to process the effects of the current market downturn. I had a client meeting the same afternoon. Reading the headlines and the words used to describe investor fear, you would expect the mood of this meeting to reflect that.
“Upbeat. Excited. Anticipation. Calm.” These are the words that I would use to describe my meeting.
This meeting was special because the husband is retiring in three weeks. It is likely the last time I will see this couple before they both are officially retired.
Wait, a meeting finalizing a retirement during such dire market conditions and those are the words used to describe it?
We had a plan for how my clients were going to retire, regardless of what the market was doing. In fact, we planned for exactly this scenario; what would happen when the market fell. It’s simply coincidence that the market fall is corresponding with my client’s retirement.
Here are the reasons my clients have confidence as we go through these rough market days:
They have perspective
We did talk about the market downturn, but my clients recalled the lessons they learned in 2008 and the years prior to that. They discussed how their experiences have given them perspective on what they hear and see in the news now.
They have a plan
This couple knew what they wanted their future to look like and took steps to plan for it. We have been working together for several years and this is simply an extension of the plan we created for them to retire. We considered their social security, their strategy to take money out of their investments and what retirement would realistically look like for them.
But this didn’t all just happen recently. My clients have been saving diligently with their 401(k)s for most of their careers. They paid off their house and continually made saving a priority.
They control what they can
My clients had calculated how much they needed to maintain their lifestyle in retirement. To that end, they monitor their spending by tracking their monthly expenses. They know the potential costs of long term care and other liabilities and they’ve insured for them. They are aware of the uncertainties that come with retirement, but they’ve done what they could to prepare.
Don’t get me wrong. Market downturns are a big deal. They are unnerving at best and it’s important to pay attention to them. But planning is even more important. Planning for retirement is what separates the panic, carnage and meltdown from the joy, peace of mind and excitement of retiring on your terms and your timeline. When you take control of your finances you won’t need to worry about market upsets having control over you.
Not every financial planner is going to offer you what you need. Working with a financial planner requires making sure that you have a good fit. We've already gone over how to decide whether you need a financial planner and making sure you're on the same page with your spouse. Now you need to make sure that the financial planner sitting in front of you is the right person to work with.
The first meeting is an interview
If you're going to pay a person to do a job for you, you need to make sure they can do that job successfully. Use the following questions to get a sense of the services this financial planner offers, compared to what you're looking for.
Learn about their business
- How do you charge your clients for services?
- What is your investment philosophy?
- What do your financial plans usually look like?
- What will my experience be as you create a financial plan for me?
- What is your ideal client?
Learn about their qualifications
- Are you a fiduciary?
A fiduciary is a person morally and legally bound to make financial decisions solely based on the interest of the client. A fiduciary will therefore make different decisions based on different clients and will not make decisions based on how much money he is going to get out of the deal.
- What certifications do you have?
I have heard of "financial advisors" recommending investments to high net worth clients without understanding how it will affect their year-end taxes. Others have given basic retirement advice that is simply wrong. Avoiding these situations is easy if you ask for credentials.
CFP® is a designation meaning Certified Financial Planner™. CFP® professionals must pass a certification examination, which requires an understanding of the areas that affect your financial plan, and agree to abide by the board's code of ethics in regards to their clients. A CFP® gives clients the confidence that their financial planner is held to a certain standard.
CPA® is a Certified Public Accountant. In order to receive this designation, accounting practitioners are required not only to pass a test, but to demonstrate extensive experience in their field. CPAs provide insight into complex tax issues, such as stock options and how to reduce one’s overall tax liability.
CFA®designates Chartered Financial Analysts. Like the other designations above, it requires testing and extensive work in order to receive the designation of CFA®. People who hold this designation are going to be trained in how to extensively evaluate individual stocks and investments.
There are many designations that have not been listed here. Unfortunately, many of those can be obtained via a quick test of knowledge or even a short seminar. While there are definitely capable advisors who do not have a CFP®, a CPA®, or a CFA®, these designations provide the best initial understanding of a financial planner's knowledge and background. Practitioners with these designations are knowledgeable on all aspects of your finances and how they will affect your life.
Give yourself time before your first meeting to prepare your questions. Is there anything specific you'd like to remember to ask? Review your questions after the meeting. How did you feel about the answers this financial planner gave in response?
Preparing for your meeting gives you the confidence to choose the best possible advisor for your financial planning needs.
Throw your Net Worth Statement in the trash. Every year most Americans look at this piece of paper riddled with dollars and cents and they draw drastic conclusions about their financial success. Often when I sit down with clients, there is a tendency to look solely at that final number—the one you get when you subtract your total liabilities from your total assets—and derive satisfaction only if the number is higher than the previous year’s.
We’ve been wrongly conditioned to identify success and happiness with larger amounts of money in our bank accounts, and very rarely do we celebrate the milestones that our money helped us experience.
I invite you to consider your upcoming year and events. Think about things like family reunions, big football games, Caribbean vacations, taking a road trip along the California coast, decorating the new guest bedroom and so on. These are all things that your finances empowered you to enjoy. Amend your Net Worth Statement to include a new line item:
“Where My Money Took Me”
I’ll be inviting my own clients to amend their Net Worth Statements this year, as I have amended my own from 2014. For my family, I added: the trips I took to meet my baby niece and the beauty that I saw on a trip to the Northwest. I also included buying a new home, the luxury of decorating it and buying the furniture we wanted to make our guests feel welcome and comfortable.
Yes, the figures are important, but it would be a shame to not include the life we've been able to experience because of them.
Every client I have is a different relationship. I work hard to understand my clients as individuals and to learn what is different about what each of them needs and how they like to work. The best clients understand that there are things they can do to contribute to a productive relationship with their advisor. Here are some of the ways to be a great client to your financial planner:
Talk About Concerns
Money is often a very difficult thing to talk about. There is a lot of stress wrapped up in money, and a lot of potential for feeling vulnerable. Unfortunately, what that means is that it is even more important that every concern, every fear is really addressed. A good financial advisor is understanding of the fears and concerns regarding finances. A great client will have trust in their advisor to provide great information without being rude. This goes for concerns about fees, about the future of your money, about the decisions being made by your advisor, and about anything else you can think of. Voicing concerns early and often avoids future rework and strengthens the relationship you have with your financial advisor. It actually helps me do my job better!
Be Aware of Fees
My clients know that I am clear and upfront about all of my fees. I have even written here about fee structures for financial advisors. However, the best clients make a point to understand these fees also, in order to avoid misunderstandings later in the game. Great clients are not the ones that would overpay; they simply do not want me to work for free.
Be Present in Meetings
Sometimes this means taking notes during our meetings, sometimes this means just turning off phones. I always make myself available to my clients in case questions arise the day after a meeting, and even the most present clients will have these questions on occasion. Great clients know, though, that we are in this together.
Engaging is about dialogue, more than just talking about concerns. It means voicing hopes as well as concerns, explaining what you're hearing, and asking for clarification when you need it. Sometimes things don't make sense! Some of the best learning experiences I have as an advisor center around clients who haven't understood what we are talking about. When my clients tell me they don't understand, I learn to do better. The "ah-ha" moments teach me the most. A client will rephrase what I've been saying and teach me a new way of communicating the idea to future clients.
Let's enjoy the process!
Finances are not always fun. They can be frustrating; they can be the source of worry and shame. That doesn't mean that my relationship with my clients needs to be similarly frustrating! Great clients know that we are in this together to make the best improvements we can. We learn together and are grateful for that process. I am so grateful for my clients and it is amazing when they feel the same!
Deciding whether or not you need a financial advisor is the first step in getting your financial house in order. In making this important decision, let's look at the type of person who benefits most from working with a financial advisor.
She has a full schedule
You know the importance of financial planning , but don't have the time to commit to learning all the intricacies involved in managing your money. To you, spending time with family and doing things you enjoy are more important. A financial advisor can do the work and let you live life.
He is intimidated
To this person, money is a confusing thing. I work with a lot of people who are highly competent in every area of their life and yet feel intimidated by investing. This could be largely in part because they have never had to do it or they just don't feel comfortable with numbers. A financial advisor can easily alleviate many of the financial fears you might have.
She is facing a major life transition
You don't know what you don't know. Going through a transition, whether it be retirement, the recent loss of your spouse or switching jobs, can be a tremendous source of stress, both in terms of finances and life in general. Walking with a financial advisor through those times of transition, especially an advisor who has been trained in working with transitions, can be invaluable.
He values financial advice
You may not be able to watch your finances on a regular basis. In this circumstance, you may want financial advice to guide you toward the future you desire.
Financial decisions weigh heavily on her
If financial decisions keep you up at night, you are probably in need of an advisor. A well-developed plan should ease financial concerns and allow you to focus on the things that are important in life.
There's the marriage issue
Managing your finances on your own is one thing, partnering with your spouse is another. This can be done well, but even if one spouse is very comfortable managing the finances, if the other spouse is not, an advisor may be a benefit to both.
Not everyone needs a financial advisor
This may sound strange coming from a professional financial advisor, but it's important to recognize that when it comes to finances, one solution is not right for everyone. Anyone who tells you anything different is lying to you!
Here are the characteristics of someone who probably doesn't need a financial advisor:
They love personal finance and read about it all the time
There is a wealth of information on the internet about personal finance. There are entire websites set up to provide the step-by-step guidance on how to get your financial house in order. To some, this is an exiting way to spend an evening. People who enjoy it will not need a professional to take it off their plate.
They have the time to learn and manage their investments going forward
It's one thing to know how to do something and another thing to actually do it and do it consistently. Financial planning takes consistent time and effort. Those who are willing to put in that time and effort do not need a financial advisor.
Market uncertainty excites them
One of the biggest advantages of working with a financial advisor is staying on course when the market goes down. Making a mistake at the bottom of a market cycle can have significant implications on your portfolio. DIY investors must have the stomach for the market cycles and intuitively understand how markets work.
They want to be in control
This is sobering to write as I can be this person. I'm independent, self-employed and know that I am capable of learning most things. I'm learning to get help where needed, but know that if someone is not willing to give up control with their finances, they won't. People who cannot let go of control of their finances should not bother with employing an advisor.
They don't want to spend the money
If you don't want to pay for financial advice, then don't. You will always be thinking about the price tag, which will deter you from focusing on what's really important.
If it seems you are a person who does not need a financial advisor for any of these reasons, but you are still unsure of your next steps, schedule a call with me. I would love to point you in the right direction and give you the resources you need to help you get on track. There are absolutely no obligations or strings attached. I gain tremendous satisfaction from helping people with their finances, even when it means they do not use me as their financial advisor.
When my husband and I bought our first house, it was with the intention of having a home office. I wanted the flexibility. I would still have the physical office, but being able to work from home was key in creating the work/life balance and flexibility that I desired. I wasn't nervous. Knowing that many had gone before me in having a successful home office, I felt confident as I started attacking the boxes. I had no idea what I was in for. After several hours of organizing and sifting through papers, I realized all I had really done in that time was create new piles out of old ones. I left for the day, figuring a fresh set of eyes would make the difference, but the next day was the same. I wasn’t making progress. I finally had to admit to myself that I’m just not as organized as I would like to think I am.
Some time ago, I probably would have just kept working at organizing and gotten no where. The internet is full of lists and great resources – “21 Ideas for Organizing Your Home Office” or “10 Ways to Organize Your Home Office.” I would have picked eight directions at once and gotten frustrated and walked away from each of the new approaches I discovered. But I have learned too much, and I know when I need help. The stakes were too high for me, because this wasn’t just about the office, it was about the next step in my career and spending time with people and causes that are important to me.
Thankfully, my friend Terri works at Top Drawer Organizing. She is a professional organizer and frankly a God send. I emailed my plea for help. In our initial exchange, I wrote, “I’m a little worried to be showing off my mess, but I need help more than I need to hide.” Isn’t that the truth. As Terri quickly assured me, “That’s what EVERYONE says!” She’s right. We all need help but want to hide. I had reached a point where I just couldn’t get out of my rut I could successfully push paper around, but I wasn’t getting closer to an organized office. I couldn’t see what my next steps were.
Terri walked into the situation and immediately started walking me towards my end goal. A trained professional is best when asked to put together a mess. Within our three hour appointment, Terri had pinpointed the strategies that I specifically needed to solve my problems. Her solutions were going to work best for me because they were based on my work flow and personality all in the context of the space I had to work with. There was immediate progress and I was given a short list of what I needed to do. They were small, bite size items that I would enjoy doing (find this organizing tool in a color or design that makes you happy.)
I didn’t even know where to start, but Terri knew enough about organizing to know that there isn’t one right way, or a set of 10 ideas that will work for every home office. Terri wasn’t turning my office into her office, she was helping me build something that would work, just for me. Now, we are working together in organizing my home office. I have my “to-do” list and Terri has hers. I don’t know how to design a custom closet specifically for the masses of paper and the specific workflows that I have, but Terri does. And she’s good at it. I know that anything she does is going to be better than whatever I would put together and give me a greater chance of success. She ended up putting together an office that I am confident will work well for me into the future. And I know that at any point I begin to struggle or have problems, I can call Terri and she will be able to come in and pick up where we just left off.
Organization is not my strong-suit. It is difficult to admit when I can’t do something that sounds like it should be so easy, but these are the facts. We can’t be good at everything. This is why I am a financial planner. Finances are difficult, and the stakes are enormous. Maintaining your standard of living, sending your children or grandchildren to college, the confidence in knowing that you have a financial plan in place – these are high stakes. Many people don’t know where to start.
The internet has amassed more knowledge on personal finance than anyone could ever absorb and it continues to grow. However, just because there is a plentiful amount of knowledge available doesn’t mean that it is easy to apply it to your situation. What works for one may not work for the next. Working with a professional should provide a deep sense of clarity on what you need for your situation. Terri provided that clarity to me for my home office, and that’s what I strive to do with my clients on a daily basis in finance.
When the stakes are so high, and the rewards so big, it has to be okay to show your mess. Rarely is a person’s finance in top notch shape when they come to work with a financial planner – and that’s normal. If your finances were in order and you had confidence in your strategy, you may not need a financial planner. Working with a financial planner should help take you out of your rut and get you on track for your goals. One of the biggest benefits of working with a planner is the change of perspective that they can offer you. They will help you get a sense of confidence as you start to make progress towards your goals.