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Money problems can take many forms. You might be swamped with debt, struggling to save or pay for college for your kids or worried about outliving your resources in retirement. (Retirement? What retirement?)
Maybe you’re confused by a bewildering array of options and so you do nothing, which just adds to your stress and deepens the hole you find yourself in.
But money problems are just itching for solutions, if you have the foundation, courage and focus to make changes.
By foundation, I mean the basic knowledge you need to understand how to make financial decisions that move you toward the life you value.
If your first reaction is, "Whoa—I don’t know much about the fine points of money," you’re not alone. Here’s a quiz to give you a quick idea of how firm your financial foundation is right now.
Answer each with either TRUE or FALSE:
- Spending more than I can afford (adding to debt) reduces my financial well-being. ___
- The more debt I carry, the more difficult it is to save. _____
- Spending on things I do not truly value is likely to lead me into trouble. ___
- Having a liquid emergency fund is prudent for unexpected expenses or situations, like a major home repair or losing my job. _____
- Investing in risky assets is a dangerous strategy for money I’ll need in the short-term. ___
- Protecting my most valuable assets (health, family, property) is important. ____
- I should have a Will and Powers of Attorney in case I die or become incapacitated. ____
- Filing my taxes on time is important. _____
- My portfolio should support my situation and future plans as well as my risk tolerance and time horizon. ____
If you answered TRUE to these questions, your foundation is on its way. If you answered FALSE to any of these questions, send me an email with your thoughts.
You can hire someone to help you with the foundation (here’s a list of fee only financial planners), or you can educate yourself on the fundamentals. But once you have that firm foundation, you can follow these five steps to work your way out of money problems.
Step #1
Define the problem—you can’t solve what you don’t acknowledge. What’s happening that’s causing you financial difficulties, stress and worry? Writing it down will help bring clarity (and stop that endless loop going on in your head).
Step #2
Know what you don’t know. Identify and sort through what you know from what you don’t. For example, you might know that you’ve got $10,000 in credit card debt, but you’re not sure the best way to dig yourself out.
Step #3
Explore resources. Whether you hire a professional to help you or commit to learning from books, courses and articles from trusted sources, find the answers and/or solutions to what you don’t know.
Step #4
Create an action plan. Write it down and put it where you can’t avoid seeing it every day. If you don’t act on your goals and plan, nothing changes.
Step #5
Track your progress. Measure your headway, celebrate your wins, and make adjustments or course corrections, as you need them.
These steps aren’t complicated, but they require your personal resolve, courage, to keep on track. Missteps and challenges are not fatal. They test your desire to reach your goals—the best thing you can do with a mistake is learn from it.
Your resilience and support from your personal and professional team will get you through those moments of doubt or mistakes.
Given how complicated life is, keeping your focus on a simple, direct and clear action plan is your best ally to success.
