Financial Gut Check

In my last blog, I wrote about why some people aren’t able to keep their New Year’s resolutions or stick to a financial plan. It’s generally not that they lack discipline, or that the goal was too lofty. It is usually that they haven’t taken a hard look at the emotions behind their financial behavior. Without this knowledge it is impossible to move forward on financial goals and keep them going for the long term.

Just like when you start a diet or exercise plan at the beginning of a new year, and you find that by Jan 31st, you have already broken your plan; it’s rarely due to the excuses you tell yourself.  Although, “I’m just too busy to get to the gym” or “I don’t have time to cook healthy, nutritious meals for myself” are often true, there’s usually more underlying issues that contribute to our inability to honor our promises we make to ourselves.  I contend that there are emotional reasons we overeat or resist taking care of ourselves, both health wise or financially.

So, how honest are you with yourself about your finances? Do you hide behind the busyness of your life as an excuse to not look at your finances? Or perhaps you are simply scared to face reality! How would one go about doing a deeply honest Financial Gut Check?

Let’s start with adding a few things up. Now before you say, “I’m not good with numbers” or “Math was always my worst subject”, fear not! I’m talking addition and subtraction of long numbers only! This is 5th grade math, so those excuses don’t fly. If you are resistant to any of the following suggestions, go back to last week’s blog:

  • Total up all debt
    • Separate mortgage debt and car loans from credit card debt
    • Review the credit card amount due monthly and ask yourself, “Am I decreasing the overall amount of credit card debt on a monthly basis?”
  • Total up all assets
    • Separate Financial accounts (savings and investments) from Real Property (house, cars and collectibles)
    • Review the financial accounts monthly and ask yourself, “Am I increasing the overall amount of savings on a monthly basis?”

If the answers to both questions above are yes, then you are on the right track and should probably go to the next step on the road to financial honesty; meeting with a Financial Planning professional. The purpose of this meeting is to make sure that your savings rate is adequate to get you to the goals you have and to make sure your investments are in line with your investment time horizon and risk tolerance. A good financial planner will also help you review your insurance portfolio, making sure that crises won’t derail you from reaching your financial dreams.

There are many financial websites that can offer you similar help, but I always feel like people are more accountable when they work in tandem with another person, versus simply interacting with a software program.

If the answers to either of the two questions above were no, and you are not making any headway on reducing debt or increasing savings, it’s time for some more self honesty. I would tell you from my 25+ years of counseling people around their money goals, that there is probably some emotional resistance you might have towards paying down debt or increasing savings.

Most programs that lead to behavior change start in the same place. Identify what the problem is and how and why you ended up there. Reviewing your personal money story, how you were raised around money, what situations have happened in your adult life that impact how you view and value money, can often uncover the keys to awareness that can help you break free from debilitating money behavior.

Being honest with ourselves can be the toughest thing we ever do, but can also be the most revealing and freeing activity leading to changing our ways. Whether you eat or drink too much, gossip, gamble, overspend or hoard money, change begins with honesty.

Make this New Year of 2013 the year of true change by honestly looking at your finances and your money behavior. Here’s to a healthy and prosperous new year for all!


Why Can’t We Keep Our New Year’s Financial Resolutions?

Did you start out the year like many of us, saying “I’m going to lose weight, get to the
gym more, reduce my debt, spend less and save more”… and have you already fallen
off the wagon? Why do we make the same resolutions every year but are continually
not able to stick with our goals?

And please don’t say we don’t want it enough. There isn’t a person out there who
wants to be in debt or scared that they haven’t saved enough money. I’ve never met
a person who wants to end up as a bag lady or working until they die as a greeter at
Walmart (not that there’s anything wrong with that)! No more than anyone wants to
be overweight or unhealthy.

So why can’t we stick to our plans and goals? My belief after 25+ years of counseling
people around money issues, is that we all have deep seated emotions surrounding
and defining our money lives. And until we address those issues, we are destined to
repeat the same patterns over and over again.

So if your goal was to reduce, pay off debt or save more, and you haven’t been able
to achieve this, ask yourself, “What’s behind your over spending?” Perhaps you
were raised without much and now that you are working and making a good living,
you feel like you deserve to have what you want. Perhaps shopping is a way you
reward yourself for all your hard work. On the other hand, maybe you are married
to someone who overspends, and you feel like no matter what you do, you can’t get
ahead. So if you can’t beat them, join them!

Maybe you believe that overspending enhances your happiness, and what if you
died tomorrow, think of all the spending you’d miss out on! It’s different for every
person, but trust me on this; behind overspending and not being able to stick to a
budget, there exists some emotional feeling fueling the behavior.

Gratefully, I am not an over spender. Never have been, never could be. But I have
bordered on what I call being a compulsive saver. Most people think, “Well that’s a
good problem to have”, and in some ways I’d agree. I’d rather be an over-saver than
an over-spender. But my belief system holds true. Behind all compulsive savers,
there are emotional forces fueling the saving.

In addition, don’t think for a minute that being an obsessive saver can’t cause you
problems; especially if you are in a relationship with someone who doesn’t share
your same belief system around money. Many relationships have ended over
couples not being able to agree about money.

I’ve seen savers who are close to money hoarders, who lose friends over the fact
that they count pennies between each other. I’ve seen compulsive savers deny
themselves the enjoyment around the wealth that they have created. So what
emotions lie behind extreme savings? Usually, there is a deep fear of never having
enough money.

In my case, my father was an immigrant to this country and while we were growing
up, we never had some of the nicer things my friends had. In fact, I thought we were
poor, but it turns out we were middle class. But instead of going off in the direction
of over spending (which could have happened), I took on my parents’ fear of not
having enough money. In many ways I mirrored their behavior.

But here’s the difference; I’m not an immigrant. My husband and I earn a very nice
combined income, and I work hard. I’ve been focused on saving for the majority
of my life. Yet I’m married to a man who has pined for a lake house or mountain
house for as long as I’ve been married to him (and that is over 23 years)! Now in
all honesty, for the first 10 years of our marriage, we could barely afford our first
house, but after the first 10 years it was doable. Yet I resisted over fear of spending
the money.

I had to do some hard work on myself; to let go of the fears that my parents planted
deep in my psyche, that I should not spend, but save, save, save. It didn’t happen
overnight but I’m happy to report, that I really don’t worry about money (much!)
and we are embarking on the purchase of a lake house property.

I’ve chosen to BELIEVE the financial plan I update for myself annually, which says
we are OK. We are on track if not ahead of a decent retirement, not too far down the
road (if that be our choice).

You too can overcome your financial behavior if it needs to be fixed. Is it going to
be easy? Not likely! But start with looking deeper at your patterns and take a good
honest look at what drives your behavior. This self honesty is the starting point to
change! You can do it…I did!

Happy New year!