Financial Transitions

From Living High on the Hog to Pinching Pennies: When Your Lifestyle Has to Change

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.

 

When Values Cause Pain

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 compensate

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.

We avoid

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 bother?

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.

You're the Next Contestant . . . Why It's Hard to Talk About Money in Marriage

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.

5 Things Your Financial Planner Wishes You Would Do

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.

Engage

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!

How I Learned to Embrace Life's Transitions

 
 

"What is wrong with you?!  You are all over the map!"  My husband was exasperated. "One day you want one thing and the next you want something completely different. Can you just pick?"

He was right – I was all over the map. We got married and ten weeks later I bought the financial planning firm I had been working in. I was overwhelmed with the transitions that were happening in my life. I was now expected to be a wife and a business owner, neither of which I had any experience, but desperately wanted to do both well. I was in uncharted territory. There were new expectations on me and I didn’t know how to meet those expectations, or even at times what the new expectations were. Many of the reference points that guided me so clearly before seemed irrelevant now and I felt lost.

Even through the uncertainty, there were several things I knew. I knew I was passionate about working in financial planning as well as working with recently widowed women. As I continued my research in how to best serve recently widowed women, I joined the Sudden Money program, an organization that trains financial advisors on how to help clients manage transition. In just the first set of training, my unknowing response to my recent transitions started to make sense. They use an illustration that shows what it’s like navigating your way through a transition.

There are several things this illustration clarified for me.

Transitions mean moving forward

Leaving behind life as it was is hard and oftentimes comes with many different layers of grief for what was lost. When I got married, even though that was a positive transition, I was still experiencing loss - the loss if independence that I had valued so dearly and the "options" I felt I had when it was just me. Grief, even when you are transitioning to something better is an important step in making a successful transition.

Transitions also require uncertainty

Uncertainty about what steps we need to take to the "new normal" and what that process will look like. It would be easy to list out the steps we need to take to get from point A to point B, but it's just not the way transitions work. Even the most planned transitions cannot account for the emotional experience of whoever is walking through it.

Transitions require a sense of hope

Hope that someday you will have a "new normal."  Hope that you're not broken forever and the pieces can be put back together, when the transition feels like a scene out of your worst nightmare. Hope that you can move into a new phase of life that will be fulfilling and filled with life. I hoped that someday I would be able to run a successful business that would have a meaningful impact on my client's lives while prioritizing my new husband and future family.

I learned several things about myself in my transition.

Lesson 1: It's okay to be "all over the board."  

That is a normal part of the transition process. Given this realization, I set up guidelines to protect myself during this period - no excessive spending, no big decisions, no commitments that would require a significant amount of my time and energy. This was important because I wanted to be successful, and knew I wasn't in the right frame of mind to make long lasting decisions. The last thing I wanted to do was to unknowingly sabotage my future. Many people had opinions, oftentimes unsolicited about what I should do yet few took the time to really listen to who I was and the values that I held most dear, regardless of situation. I knew that wherever life took me, these values were elements that were going to be the building blocks of my future.

Lesson 2: be patient with yourself

I realized it would take time to reach my "new normal" and that I had to go through the uncertainty and the process of transition before I could truly discover who I wanted to be at the end of the transition.

Lesson 3: care for Yourself

I started exercising on a regular basis and started counseling. I took notice of what I was eating and made sure that I was putting food in my body that would help instead of hurt me. Taking time for these things brought a sense of normalcy that helped guide me through my transitions. It kept me present in the process so I could confidently find the right path for me.

When there is a transition, it often includes many financial uncertainties. If you or someone you love is going through a recent transition and concerned about making wise decisions, schedule a free 30 minute consultation with Hannah.