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!


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