The Least Expensive Financial Advisor Around
We all want to bury our head in the sand when it comes to our finances at some point in life. That’s totally understandable and okay, but achieving our goals and living our dreams means we have to pay attention.
Life is super busy, and sometimes the things that are most important to you feel out of reach because you don’t have time.
Finances are a prime example, right? Who has time to manage their finances, seriously.
You want to be financially sound and free. Life is full, with demanding jobs, relationships, commitments, and everything else, there’s simply not time to manage your finances. In fact, you might find it’s been months since you’ve looked at where your money is coming and going. Perhaps you even have bills or statements that don’t get opened.
You wonder, is this normal? The answer is yes.
Then you might wonder, is this ok? The answer is no.
It may be normal, but it’s not acceptable, because this is not going to get you to where you want to go, be that financial freedom, retirement, getting out of debt or some other big goal. If you’re not working towards that goal, then you’re drifting away from it. You also can’t turn off finances by walking away. You might be able to live in this fantasy land for a while, but eventually, it will eat away at your attention, robbing you of joy and lingering over you like a cloud.
Financial apathy: the real problem
First, the riddle about being too busy. Is that really the problem? What other things in your life do you prioritize, despite being busy? How about haircuts. When did you last get your haircut? If you’re like me, it happens every month or two, without fail. We make time for the things that are important, and time for these other simple things. Finances are more important than haircuts, but I will also let you know I have had periods where I’ve avoided my finances completely.
So let’s assume our finances are important, but we avoid them. The problem isn’t that we’re busy. Why do we avoid them when we make time for other things? Let’s list the reasons!
I am worried I’m spending too much.
I don’t think I’m making enough.
I know there’s a bill that needs my attention.
I know there are questions I can’t answer.
I am distraught about the collapsing stock market that’s hit my portfolio.
I’m distraught about the raging bull market that went zooming by the cash I’m holding.
I don’t want to face a bad decision I made.
I am horrible with money.
For every dollar I own, there are a million reasons why I might not want to pay attention to that dollar. Fear of missing out. Fear of not reaching my goals. Fear of moving backward not forwards. It’s easier to simply tune out.
This reaction is both human and understandable, and at the same time, it is absurd and irrational. How can I possibly make progress if I don’t keep track? How can I get stronger if I don’t pay attention to my workout regime? How can I live a healthier life if I don’t pay attention to my food and sleep? How can I learn a language, an instrument, or any skill if I don’t work at it?
An exercise for building financial awareness
Let’s start today making our finances a little more like our haircuts. Less emotional. More routine. Lower stakes. Not about my failings, but about improving myself or my family.
To do this, let’s reframe the exercise. Pretend you’re a financial advisor dealing with another person’s finances. This person happens to spend and earn like you, but let’s pretend for a minute it isn’t you. As an advisor, your name is Ego. You’re dealing with your client named Id.
Your poor client Id is concerned he’s the worst financial train wreck ever. That’s silly. You’ve seen far worse. You’ve worked with “rich” movie stars who are now bankrupt, watching 100 million dollars disappear. Poor Id is actually doing ok. But Id stopped opening bank statements, doesn’t know what he spends, and has his head in the sand. You’ll have to be a bit gentle.
Day 1 for 10 minutes. Your biggest goal is to make sure that Id comes back to the table to meet again. You’re not going to solve everything today. You have lots of work to do. You want to know Id’s goals, understand Id’s strengths and biases, and help Id along. That means many visits, many conversations to come. Ask Id about his fears. Also, understand why Id wants to talk to you, the financial advisor Ego, today. Learn something about Id, and agree with Id on a schedule. How about every day for 10 minutes.
Day 2 for 10 minutes. What are the good financial things you can celebrate with Id? Maybe Id has a job? Maybe Id is even earning more than the average U.S. household income of $56k per year. Maybe Id has made some good decisions recently about his finances, cutting an expense here or there. If there are bright spots, let’s point these out and celebrate these.
Day 3 for 10 minutes. Next, let’s help Id pay attention to where his money goes. Let’s setup some categories with some simple tracking. Of course, you and Id will get these categories wrong at first. Who knows how to categorize. That’s ok. You’re giving Id some permission to do things wrong, to make some mistakes. Let’s come up with our best guess at a few categories that can define Id’s spending.
Day 4 for 10 minutes. How many transactions can we categorize using our new category schema in the next 10 minutes? This is fun and fast. Let’s feel the sense of progress. Can we categorize our spending for the last week in 10 minutes? That would be a terrific achievement.
Day 5 for 10 minutes. Let’s categorize some new transactions, and let’s also pay attention to what we notice based on our tracking. Where is Id’s money going? This isn’t a judgment. This is an autopsy of something that’s happened in the past that might help you shape some goals for the future.
Day 6 for 10 minutes. Let’s categorize everything new since yesterday. Feels good, right? Now let’s also start to outline our goals. What would our goals be? How might we prioritize them? Retirement? Kids? Homes and cars? Vacations? How much would they cost if we had to guess? We can write these down on a blank sheet in our spreadsheet.
Day 7 for 10 minutes. Like we do every day, we’ll categorize what’s new, but let’s also start to make some guesses about how much we’re spending over a month. What do we think Id’s monthly budget might look like? How much can we save each month?
Day 8 for 10 minutes. After a minute or two categorizing (feels good!), let’s look at our balance sheet for the first time. How much debt do we have? How much are our assets? Remember, we’re Ego, the coach of Id. We’re just observing and asking questions. We’ve seen far worse, and we’re not here to make value statements. We want Id to feel great that he’s facing his finances.
Day 9 for 10 minutes. After a zippy categorization session of our recent spending and earnings from yesterday, let’s start to match up our spending trends, our balance sheet, and our goals. How can we reconcile these? How can we take what we have to get to where we want to go? We won’t answer this today, but we can start to frame these questions.
Day 10 for 10 minutes. We quickly categorize what’s new, and then we sketch out a possible plan. Actually, since it’s the first draft, a lot of it won’t be possible. It’s an incomplete plan. That’s ok. We’re not going for perfect, but we’re scheming. What if we saved a little more here, could we put that money towards this goal there? What if?
A million miles in 100 minutes
Are we done? Not yet. But have we come a million miles? For sure! In 10 days, in 10 minutes a day, we’ve spent 100 minutes on our finances. We know more about what we’re spending. We are facing our debts. We’re dreaming about our goals.
We don’t have a beautiful Powerpoint deck about our finances yet, but I’ll let you in on a secret. Beautiful Powerpoint presentations never solved any real problems. Instead, we have data, we’re looking at the data, we’re asking and slowly answering questions. We’re helping Id take control.
We’ve taken the mountain we couldn’t climb before, the mountain of financial health, and we’ve turned it into a daily haircut. Predictable. Simple. Not antagonistic, but instead curious. Ego has helped us deal with Id, who was distraught, but now sees that there is a way forward that might still allow us to have our latte and our retirement too. Maybe.
Pretend you are Ego. Your mission to help a poor Id out there, perhaps one who is very related to you. It requires 10 minutes a day. Can you start today?