Why we wait to get our finances in order

Personal Money Planning has taken up a group virtual challenge. The task consists of running (or walking) a total of 1083 miles, which is the distance across the United Kingdom. As a team, we total our activities to accumulate the 1783km distance. Since Gary is really into running, and logs about 4,000 miles per day (well, not quite, but almost), he is pulling the rest of us along well. However, the competitive nature in me could not allow him to take full credit for getting us from Lands End to John O'Groats. Each day I have been logging a few miles myself. I’m just as determined to claim my medal as he is- 

The other morning, I was approaching my third mile when the temperature began to quickly rise. Since I was at the opposite end of my starting point, I had no other option but to continue my trek. As I was rounding the corner, a lady in a dark SUV drove by, looked at my red, sweaty face, and gave me an encouraging thumbs up. That doesn’t seem like much, but it gave me the enthusiasm I needed to make it the rest of the way.

Why is it that we often ignore or avoid the things we know are good for us, take for instance, exercising? 

While we know that getting in our steps each day while adhering to a healthy diet is physically and emotionally good for us, we still find ourselves sitting on the couch, ordering a pizza, and binge watching a crime series on Netflix.   

The same can be said about our financial planning goals. Instead of lacing up the financial sneakers in preparation for a nice walk in the park, we instead spend a lot of time making up excuses as to why we don’t have, well, the time.  

Where we often find ourselves putting in that time is while we are in the middle of a financial crisis, hurriedly throwing together something bound with duct tape. Sure, it may do for now, but it probably won’t hold up over the long term.  

If you find this idea of financial planning sounds eerily familiar, don’t fret. You are in good company with roughly 70% of the population that have no written financial plan in place. However, being with the “in” crowd isn’t always a good thing. Almost 60% of these households would also go into debt with an unexpected $500 bill. Having a plan in place could alleviate this issue. 

The reasons for not doing the things that are good for us are plentiful, but let us look at some of the most common excuses.   

“It costs too much”- Many households have the opinion that hiring a financial planner will cost too much money, but they have no real figure to put alongside that argument. How much is too much? Can you afford an additional payment of $125-$200 per month for a year? That’s the average cost of a financial plan, usually right around $2,500. The best part is that after the plan is in place, you likely won’t need to revisit it but every few years, as you near retirement, or if you experience a life altering event, like a death, divorce, or significant change in income. 

“I don’t think we really need a professional plan”- Many individuals don’t know what they don’t know. This means that while they have a decent idea of some of the moving parts in a plan, they may not realize how those affect other parts, whether complimentary or contradictory. Having someone working for you that have the skills and training to understand the various aspects of the planning issues involved can not only save you a lot of money, but also a lot of time. It may be possible to have two separate financial goals working simultaneously with one another, allowing you to accomplish more of your goals more quickly.

"I've got plenty of time”- Well, you have plenty of time until you don’t. I became a widow at 39-years of age. I also thought there was plenty of time ahead on our financial journey. Sadly, this isn’t always the case, and alternative plans should be considered. Waiting to plan until there is an emergency does not always produce the most favorable outcomes.

“It seems so complicated. I don’t even understand what they (the advisors) need”- If financial planning was super easy, I likely would be out of a job. It’s difficult, and I understand that, but your advisor is there to guide you through the process. Sure, you will need to produce the statements and information, but they will be able to review it with you to ensure it is thorough and accurate. Even more importantly, your advisor will be able to help you prioritize your tasks to accomplish the most important ones first. 

“I don’t have the time it takes to get everything together”- Believe it or not, most individuals are not that organized when it comes to their financial paperwork. In fact, most have no idea what financial paperwork is needed. There is often a fear of failure, or not being “good enough” with one’s finances to be able to present them to someone to review. You don’t have to create a spectacular binder to provide to the advisor…they help you do that. While some sort of organization is appreciated, showing up with a box of the right data is just as respected. Perfection isn’t expected. 

“I’m scared”- This is probably the most common reason people don’t seek the services of a professional…fear. Whether it stems from the fear of finding out you may have to work a few more years, to the fear of facing one’s inevitable mortality, being scared is a real thing. Avoidance isn’t the best route to take here though. Facing your fears, whether self-doubt, anxiety, or the thought of death, is the best option here. We often hear “that wasn’t nearly as bad as I thought it would be”, regardless of the initial fear. 

                                  

“We don’t have enough money saved to really need something like that”- During the accumulation phase, meaning pre-retirement, is the exact time you need to be creating a plan of attack. Otherwise, how will you know how much you’ll need for retirement, the best time to draw social security benefits, and whether contributing to a Traditional IRA, Roth, or ramping up savings in your employer sponsored plan makes more sense. When you need to plan is before all of these decisions can be thoughtfully planned and decided upon. 

While we can attempt to convince ourselves there is a legitimate reason for postponing getting our finances in order, what it really comes down to is the psychology of money. It’s an emotional thing, not a time thing. Money effects how we feel, act, and relate to others. In fact, the link between money and behavior is so intimate, there’s an entire field dedicated to its study: behavioral finance.  

Being able to remove the emotional aspect of the issues involved (i.e., the fear and anxiety), it allows us to make rational decisions. But with the connection between money and behavior being so tight, it is often hard to do. Having someone with an unbiased overview enables us to make those hard decisions and remain on track throughout the process.  

So, while creating a financial plan may cost some money, take some time, and create some emotions, it can also produce a peaceful and purposeful outcome. 

I understand, sometimes you just need that “thumbs up” motivation to keep you going, just like my SUV driving cheerleader. Then again, it could have been my hubby’s Danzig concert tee I was sweating all over that caused her to shoot me the thumb, but I’m going with the “keep rockin’ it” walk I was annihilating.  

Michelle Kuehner, ChFC®, FPQP™, CRPC®, CEPF®, CFF, is a Registered Investment Advisor Representative and President of Personal Money Planning. She is also a Certified Credit Counselor and Certified Financial Health Counselor, writes Fix Your Budget blog, and has over 26 years of experience in the financial industry.