Wish you were a better manager of your money? We make so many decisions every day. We can’t possibly make good choices all the time. When it comes to our hard earned dollars we want to make the best use of them possible, especially if we want to retire some day. Here are some helpful hints to being a better money manager.
“Money anxiety disorder” is a term used by psychologists to describe a condition of constant worry and unease about money. The term seems to have come into use around 2008 to 2009, when the economy was unraveling and most people were concerned about their financial well-being. Additionally, research has shown that women seem to suffer from money anxiety more than men. Here we look at what it is, how to recognize it and how the financial planning process might help.
Imagine you have come to the office of Stoffer Wealth Advisors for a consultation. You need some help in reviewing and structuring your investments. You are concerned about securing a good rate of return on your investments and want to understand what will be the best approach. Here’s how the conversation might go.
...When an old acquaintance saw the name of my business, Stoffer Wealth Advisors, he said, “As soon as I have some wealth to manage I’ll give you a call.” Clearly he was thinking of wealth only in its most narrow definition: an abundance of material possessions or money.
With all the data breaches that have occurred over the last couple of years it is hard to know when to actually ‘do something’ about protecting our credit. Having read a fair amount about the Equifax data breach issue over the last couple weeks I’m still somewhat skeptical of the level of protection we can actually achieve. In some respects, the actions we have at our disposal seem tantamount to “closing the barn door after the horse has run off” (thanks for that one mom!)
If you wanted to leave some money to your children, how would you split it between them? You could come up with numbers based upon their likely need for help. Or you could simply divide it equally…after all you love them all, well…equally. Equal distribution is probably the most common way of dividing assets. Yet, what about the situation where one of the kids is very successful financially and has no need for your money? What message does an unequal gift send? Conversely, if you were one of the children on the receiving end…what if mom and dad left all (or even most) of the money and investments to your sibling because you ‘don't need it?’ You might feel ‘less loved’, or slighted in some way, left with a nagging feeling that perhaps they really did love them a bit more than you.
Retirement success means something different to each of us. Some people see themselves working in retirement because that's what they've always done. Others are afraid to stop working for fear of running out of money. Some people just want to feel secure when they stop working and know they'll have sufficient money to live. Since retirement isn't really a destination, but a process, try our 3 P's to help create your vision of a successful retirement.
Think of all the times you felt pleasure as the result of buying something. When I started interviewing for my first job in the investment business I bought the most expensive suit I could afford. I felt like a million bucks every time I wore that suit! Of course that led to a penchant for expensive suits but that is another issue. Money does not just buy things but also experiences. How many beautiful memories come to mind because you gave yourself permission to spend money on a new experience or adventure. I can think of so many trips we took as a family or even in younger days before having children. Those were clearly happy times. Weren’t they?
We use money every day. We spend on things, experiences, etc. Maybe you are planning the next big adventure in your life…or figuring out how to save the money to remodel the bathroom. Behind these activities there is a presumption that money used in these ways will make us happy. Do money and happiness even belong together in the same sentence? In some of my workshops participants fill out a survey asking them to agree or disagree with statements on money beliefs. One of the statements is “money makes me happy.” I never kept a specific tally but I always looked at whether they checked yes or no on that question. My recollection is a fairly even split between those who agreed with the statement and those who didn’t. I wonder if some checked “no” because we’re not supposed to find happiness in such a thing as money
In the past several articles, we’ve looked at the variable nature of prices. What does a gallon of milk or a hotel room cost? How much does it cost to retire? What types of financial management services are there, how much do they cost, and which one might work best for you? In that vein, why pay someone to manage your money? I recently told the story of a client who experienced immense relief upon delegating the management of her finances. Making all the decisions on her own had left her plagued with fear and anxiety. My listener exclaimed, “But my father said never to pay fees!” Such advice might be good for one person, but not so good for another. While I agreed that one should pay as little in fees as possible, my listener’s objection raised the question: What are some of the reasons to have your money managed professionally?
Back in 2008 a woman in her mid 50’s came to my office for an initial meeting to discuss her personal finances. She had rescheduled at least three times. About half way into our meeting I asked her, “So, how was it for you gathering your information to come see me?” Her response displayed such vulnerability and courage I’ll always remember it. She said, “I’m am so embarrassed! I’m so disorganized! I’m at a point in my life where I feel like I should be more together. I’m ashamed that I don’t have more saved.” Whether you earn a little or a lot of money you can find yourself having similar feelings.
Consider the following scenario. You are perusing the menu at a restaurant, deciding what to order. The fresh, local salmon in a piquant sauce with sun gold tomatoes and basil has your mouth watering. It is $32. You definitely want fish, but immediately conclude that the salmon is simply “too expensive.” No, can’t do that. So you order cod, perfectly respectable, broiled – but plain – at $22. It arrives. It’s OK – but it isn’t what you really wanted. We’ve all experienced this type of automatic compromise that seems so sensible we accept it as the “right” decision. Such thinking may become an unconscious principle behind our money decisions. This is the smart thing to do. But is it? Why do we so often deny ourselves what we really want? One obvious answer is that it is about the money. Ten dollars is . . . well, ten dollars.