Most nights, I enjoy making dinner for my family. Of course there are days when take-out or a frozen pizza must come to the rescue, but as often as possible, I plan, procure and prepare a home cooked meal for whoever happens to be assembled. I have some classic family favorites memorized and sometimes I follow a new recipe, but invariably, I must make substitutions. Amazingly, things usually work out with a tasty dinner on the table by 7ish.
I find my work as a financial planner follows a similar pattern. There are formulas and rules to follow, but life is messy and every family is unique and so we work with available ingredients to help coax a plan along.
One challenge that affects many of us when we set the goal of improving our finances is deciding where to begin and what is most important. When multiple financial goals arise at the same time, it can be difficult to choose what to focus on first. I like to help my clients make a list of all of their financial goals and then review them to figure out the best timing for addressing each goal. If we are working to pay down debt and save for multiple goals, I help clients find a balance so that they can address the most pressing debt issues and build up some savings at the same time. Creating an adequate emergency fund is key to avoiding credit card debt in the future! Once debt is manageable and a solid emergency fund is in place, we can move on to other priorities like saving for retirement, college and a home downpayment.
Many of us would rather think about anything besides our financial lives. The language is confusing and the choices can be overwhelming. It is important to find a way to motivate yourself to put the time and energy into your personal financial plan. Humans respond fairly well to behavioral nudges. It can be helpful to find creative ways to motivate yourself to pay attention to your financial well-being. First of all, find ways to make your financial tasks specific and achievable. Set rewards for even small achievements. Before you know it, you will be ticking off the to-do list and might even find yourself enjoying the time you spend focusing on making life even better for your future self!
Change is absolutely a part of life and financial life is no exception. We move from depending on our parents toward financial independence in the world of work, often with many delays and sidetracks. Eventually, hopefully after a successful career doing what we love, we move into retirement. The bumps of transition along the way from one phase of life to the next can be full of stress and uncertainty. These are the moments when having a plan can be a tremendous relief. Understanding your options and having resources to rely on in uncertain times is the best way to prepare yourself for the unexpected, yet inevitable changes that life will throw your way.
Just like making dinner for a hungry family, planning for your financial future requires flexibility and creativity. Begin with where you are and what you have. Map out where you want to go. Design plans A, B and C to help you get there with grace as you find some ingredients missing from time to time. Who knows, those last minute substitutions could be the makings of a wonderful new recipe.
Jennipher Lommen is a Certified Financial Planner TM and Enrolled Agent who offers comprehensive financial planning and tax advice to clients in Santa Cruz, CA and beyond.