Michael F. Kay
Nov. 11, 2019
Navigating life’s challenges and transitions is endlessly complicated.
Chances are you’ve known that for a long time. But here’s confirmation. In a new study from Capital One that polled about 2000 people, a whopping 73 percent said they considered finances a source of stress in their lives—way ahead of politics (59 percent), work (49 percent) and family (46 percent).
The variables and unknowns of your financial life, such as job security, health, unexpected changes caused by global or national economic cycles are enough to boggle even the keenest of minds.
Just try making decisions on what to do with your money, factoring in asset allocation, risk, protection, estate planning, college costs, medical needs, retirement, tax planning, and everything else you have to anticipate. It can feel like a tsunami of pressure.
But here are six steps that will alleviate some of the money complexity.
1. Assess your true financial knowledge in all the areas that require decisions. In other words, know what you don’t know, examine what you believe you know, then sit down with a financial advisor armed with a long list of questions so that you can learn more. Clarity in this area is vital.
2. Make sure you and other stakeholders—your family or your life partner—are on the same page. If you are focused on achieving one goal and your spouse or partner on another, the stage is set for failure.
3. Ask yourself: what are your most important areas of financial concern? If you have a family, consider the greatest threats to their security. It might be your death or disability. Start there.
4. Examine your cash flow and figure out where your money goes, on a percentage basis. If you find that dollars are escaping into areas of lesser value, you can stop spending there and save the money for your most important needs.
If you don’t have a simple method of gathering and analyzing this information, there are many automated programs that can do the calculations for you. I am not endorsing any one program, but check out such popular software as Mint.com, YNAB, or Quicken and choose the one that you feel most comfortable using.
5. Once you line up your most important goals and concerns, target the amounts you can apply toward their attainment. You need to know your numbers in order to do this effectively.
Then automate the process, just as you do your contribution to a retirement savings plan. You can set up payroll deductions to be put into various accounts, or automatic transfers from your checking or savings into investment accounts. All of this is simple and basic. You can’t spend dollars you don’t see.
6. Get help in the areas where your knowledge and experience are insufficient or where you would just be distracted from focusing on your most important financial concerns. For example, if you’re a business owner, taking your time away from operating your business to learn a new set of skills makes little sense. Leverage your time.
Once you’ve gone through the six steps above, you should be better equipped to deal with what’s most important to you. If your financial life is well organized, you can then devote more energy to keeping your professional skills sharpened, and to acquiring knowledge that makes you more valuable and more able to survive changes in your work environment.
You will have more comfort in the basic aspects of your financial security so that you can focus on your family, your health and other areas that bring you satisfaction and joy.
There may be nothing you can do about recessions, global economic shifts or changes in the tax laws, but you can safeguard your financial security—and peace of mind—to the greatest degree possible.