Did you really think you’d escape another new-year-resolution-related, don’t-spend-your-hard-earned-money post? I gave it a few weeks but it’s time we talk about it.
One of my clients recently asked me if I really do everything I tell her to do. You know, the typical: save money for retirement, don’t spend it on things that are not important, allocate your portfolios appropriately, etc. good things like that. I am not going to lie to my clients (after all, if they can’t trust me, who can they trust?) so I put some thought into this question. After hours (or more like minutes) of pensive reflection, I realized that my ideas around money changed quite a lot in the last year. Some of the changes were a result of my personal life and some were the result of working with about 20 completely unique people over the last year. And here is what I learned in 2016.
- It’s not all about money. Before I went into the business of helping people solve money related problems, I was all about technical knowledge. Don’t get me wrong, I still am but there is a place for that and there is a place for non-knowledge related insights. A client who calls me with a question like “Can you help me with the tax implications of a settlement” needs concrete knowledge. But many people don’t. Actually, most people who call me need organization, guidance, and help to figure out where they are now in life more than they need my expertise on tax planning. The lesson I learned is that the behavioral aspect of finances is way more important for some people than the technical one. The lesson I want you to remember is that it’s not all about hard core knowledge. Even if you don’t know anything about calculating retirement needs, you do have the skills required to sit down and think about what makes you happy about your money habits and what does not. So please, sit down and do it.
- There is not one way to do it right. Generally, I am a very black and white person. I do not exist well in the grey area. Up until last June, I was convinced that there is one way to approach your finances. And then in June, the unthinkable happened. I started a house remodel I would probably advise many of you to think hard before undertaking it. Financially, this remodel kind of went against the correct order of things that was ingrained in my brain. And guess what…. The world did not fall apart and everything is just fine. Here is where I am sending you back to point #1. It is not always about money. Sometimes it is about your relationship with your spouse, sometimes it is about doing something that doesn’t make numbers sense but makes other kinds of sense, and sometimes, it is about learning a lesson form the Universe (I am going with this one here). The lesson I learned is that non-optimal financial decision making is perfectly fine as long as it is not constant and as long it brings you some other kind of joy, Learning how to relax about money is as important as maximizing your 401(k). What would I like you to remember? That it is ok not to beat yourself up if you overspent over the holidays (let’s not do that again though, ok) and that it is ok to make some decisions that are not necessarily going to advance your savings habits if they teach you some other life related lesson.
- Yes, you can really improve your money habits without feeling like you are depriving yourself. Stop spending money on things that you won’t remember in a year. That’s it. That’s the lesson you need to learn. I feel like I always knew this but in 2016, I really got it. There is no need to feel guilty if you spend money on things that are important in your life and that make you happy. It is not ok to be a shopaholic if you are not even going to care about what you bought in a few weeks. Or in a week. Obviously, it is really hard to implement this if you don’t know what makes you happy so take some time and think about it. Make a list and ask yourself before you buy anything if you really want this item. If you want more on this, see http://attainablewealthfp.com/finding-the-happiness-in-saving/
- Spend some money, after all. This is important as saving if you tend to be a responsible adult. Please ignore this advice if you already spent $400 this week on non-important-adult things. We usually make adjustments when something big happens in your life that makes you re-evaluate our spending. But there is no need to wait for an external shock. Why not think about this now and allocate some money towards fun things: travel, Coach purses, video games… whatever they may be for you. I learned that it is important to spend money on things that make my life easier and I fully intend to spend even more of it for this purpose in 2017. Don’t feel bad to do the same.
- Spend some time on your money life. Think. Plan. Whether you do it with a financial planner or on your own, just do it. Not knowing is not good. Avoiding thinking about your credit card debt or the lack of retirement funds is definitely not the way to solve the problem. One of the most empowering things you can do is to take inventory of all your finances and put together a plan (be it a very, very slow plan) of how to make your finances just a little bit better. I didn’t learn this lesson last year but I did learn in 2016 that it is ok if I don’t do everything in 5 minutes. Doing something over 5 years is as good as doing it in one year.
I hope you are motivated enough now to just go and do something about your finances.