Many people feel embarrassed about their personal finances. A 2022 survey by Beyond Finance showed 51% of folks were ashamed of their finances and 66% had avoided social events because of embarrassment about their financial situation. That’s a lot of people dealing in secret with financial shame!
Perhaps you have been focused on your career, promotions, travel, family and friends, and like many professionals in their late 30s and 40s, your income and financial life has increased in size and complexity. Maybe you’ve made some financial mistakes along the way. It’s ok, we all have. I worked at a large hedge fund for 15 years with over 100 employees, so I’ve seen it firsthand: just because you are good at making money doesn’t mean you are good at handling money (it doesn’t matter how much you earn if you spend more than you make).
Why is Personal Finance Hard?
There are several reasons why managing your own personal finances is particularly difficult. Take for instance the lack of basic education in personal finance. Although there has been some recent momentum in secondary education, basic personal finance (I.e., Home Economics) is not required in most states for high school graduates, so most people are on their own to educate themselves – often by trial and error.
Furthermore our parents, and in particular their parents, worked one or two jobs during their lifetimes for companies providing pensions. Turns out that pensions are expensive, and the associated liabilities stink up a corporation’s balance sheets, which investors don’t like. The 401(k) was created in the late 70’s and quickly became the go-to retirement plan. While they are cheaper to administer, 401(k)s transfer much of the responsibility of saving for retirement onto the employee, leaving it up to you to construct your own retirement portfolio, often from a limited selection of high-priced mutual funds or an overwhelming menu of over 100 options. (I like the Cheesecake Factory too, but the last time I checked their menu was over 20 pages long with 250 items often resulting in decision paralysis.)
Take Charge of Your Personal Finances
While most people find managing their personal finances to be difficult, taking ownership of your situation is the first step towards achieving your financial goals.
The internet seems to dispense a lot of generic advice that everyone should follow to optimize their personal finances, but the reality is that we all have different values, goals, possessions, and activities that bring us joy, so it’s just not that simple. However, here are three things you can do right now to gain confidence and control over your personal finances:
1. Learn Something New
Like the old saying goes, Rome wasn’t built in a day. The same goes for personal finance. It takes time to learn about it and to learn what works best for you. And what works best for you now will likely not be what you need later in life. Commit to learning something new. There are many ways to do this: find a good book, listen to a podcast, or subscribe to the WHWM blog written by a CPA and CFP® Professional.
As with anything in life, there are good and bad resources. I suggest reading Carl Richard’s The One-Page Financial Plan or Morgan Housel’s The Psychology of Money (for additional book recommendations, read my blog post). Or cue up a few podcasts for your commute. I like the daily podcast by the Wall Street Journal “Your Money Briefing” for short, but timely, personal finance tips. For getting a better grip around economics “Planet Money” is a great podcast in a slightly longer format.
Stay away from the get rich books as they generally exist to get the author rich – in my opinion, there is no quick silver bullet to lasting wealth. In our opinion, the optimal way to accumulate wealth isn’t particularly risky, quick, or exciting.
2. Take One Small Step Today
Now is the perfect time to take one small step towards your financial goals. This could be setting up a budget at mint.com, setting up a recurring direct deposit into a 529 plan for your child’s college, or moving your emergency fund from that savings account yielding 0.20% to an online high yield savings account earning 20 times that.
3. Ask for Help
A 2021 poll of over 2,000 Americans showed that most people would rather talk about health, sex and even politics over money. This is unfortunate as I’ve gained major insights and breakthroughs in various aspects of my life by finding mentors in the areas I’m trying to improve.
A competent comprehensive financial planner should provide you with financial peace of mind through personalized advice that will give you the confidence to pursue your purpose, passions, and dreams. A great financial planner will do all these things in a non-judgmental objective manner, provide accountability, help you through the psychological money booby traps (like trying to time the market) and answer burning questions like, “Am I doing OK?” and “Can I afford to buy...?”
Remember not to try to do too much too fast; habits take time to form – this is a journey, not a destination. Celebrate each of your successes, big and small. And most importantly remember to stay positive and learn from your mistakes. There is no need to be hard on yourself – but don’t be too soft either. We are all going to continue to make mistakes as we learn and grow. You have recognized that there is room for improvement and that’s the first step.
If you’d like to learn more about how WHWM’s Founder and President, Stephen Bodwell, a CPA and CFP® professional, can help you confidentially and in a non-judgmental manner with your financial journey, schedule your complimentary, no-obligation 30-minute consultation with WHWM today.
Walnut Hill Wealth Management, LLC (“WHWM”) is a registered investment advisor offering advisory services in the State of Texas and in other jurisdictions where exempt. The information provided is as of the date indicated and subject to change.
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