I was scrolling through Facebook when I stumbled across a video of Peter Bence playing the piano. I was instantly amazed. In the midst of my procrastination, I decided the endless hours of practice he must have endured were more amazing than his ability to play. (And that’s saying something!)
In his book, Outliers, Malcolm Gladwell talks about the 10,000-hour rule. It takes roughly 10,000 hours for someone to master something. Luckily, you don’t need to put in 10,000 hours to become a master of your finances. However, you do need to put in enough time and effort to get things right. Will the financial decisions you’re making lead you where you want to go? It’s time to stop wondering and start mastering your financial plan.
Here are four things that can help you become the master of your financial plan. (For more, see: The Way You Think About Money and Your Finances.)
Learn the Basic Building Blocks of Your Financial Plan
A few weeks ago, a client walked into my office looking worn out. It had been six months since her husband had passed away. I asked her how she was dealing with the changes. She confided in me that the hardest part was starting all over when it came to finances. After 45 years of marriage, she never thought she would have to take care of simple things like paying the bills and balancing the checkbook. Until her husband passed, she never really thought about money.
As stunning as this story is, it happens more often than it should. Nobody teaches us about financial planning and money management. It’s a skill that we learn as we go along unless we don’t have to. In my client’s case, she never needed to learn, so she didn’t.
My recommendation is to educate yourself on how to manage your money before you have to. Here are five things you can do to improve your financial education:
- Check out the Wall Street Journal’s Complete Personal Finance Guidebook from your local library.
- Take a personal finance class at a local university.
- Find someone whose financial acumen you admire and spend time getting to know what made them successful.
- Spend an hour each month reviewing your current financial position.
- Work with a qualified financial planner to further your education on the most important aspects of your financial plan.
Although it won’t make you an expert, focusing on these five tactics can help you build your financial knowledge to a point where you can successfully make good financial decisions. (For related reading, see: 10 Things to Do Before Retirement.)
Learn More About Your Core Values
Becoming more knowledgeable about financial planning and understanding your plan is a great start. Unfortunately, the numbers don’t mean much if they don’t add up to a better life for you. The best way to make sure your financial plan is on the right track is to ensure it accounts for your values and what’s most important to you. Financial planning isn’t just about money; it’s about using the resources you have to live the life you want.
You can get an oil change, fill up your tank with gas, and have your GPS charged and ready, but if you don’t know where you need to go, you’ll never get there. By setting goals that are inspired by your values, you’re more likely to get to your destination.
Understand Your Money Habits and Learn How to Change Them
How did you learn about finances and money? You probably didn’t learn about it in school, and if you did, it was a short lesson thrown into math or economics. I graduated with a degree in financial management and economics, and I can only recall two times during my four years that we talked about personal finance.
What you learn about money comes from your experiences at home. Whether those experiences are good or bad, they are what you get. The way you think about money and your finances can have a big impact on reaching your goals. Many people struggle saving money for the future. Often their memories of money are full of negative messages like, money is the root of all evil or he who has the most toys win. These messages make it hard for them save and plan for the future.
I have several clients who are afraid of spending money. The feel like they have to save every last penny and they shouldn’t risk losing anything. Many of them have money memories that extend to the Great Depression. What I always remind people when it comes to finances is that there must be a balance. For example, I have a predisposition to save money. This tendency more than likely comes from my Dutch Reformed lineage. Yes, there’s a reason they call it going Dutch on a date. My wife, on the other hand, comes from an entirely different background where spending money is a way to show love. As you might surmise, if the family finances were totally in my control, we might save every penny. If we left the finances up to my wife, we might spend everything.
What we need to remember is that neither one of us is right. If we save everything, we will give up great opportunities and experiences we may never get back. On the other hand, if we spend everything today, what will we have for the future? Having balance is an important part of achieving all of our goals. We have experiences with our children that we don’t want to miss out on, and we have plans for the future that we want to make sure we are ready for. Most importantly we communicate with each other what our values are and why.
Discuss Your Financial Plan with the People You Love
Having a solid financial plan won’t matter if you don’t share it with the people you love. Many people create a financial plan and then keep it a secret. They store it with their will, life insurance, and other financial documents never to discuss them after they were made. But what happens when you aren’t able to make the decisions anymore?
Let’s face it, we all will get to a point in life where someone will be making decisions for us. The more you talk about your financial goals, dreams, and choices, the more comfortable you will be with them. You may even find that having people in your corner when it comes to achieving your goals is a great motivator to keep going. Many families and couples struggle with open and honest communication about money. You may want to have you financial advisor act as an intermediary for your conversations. We recommend sharing the important parts of your financial plan with your loved ones on a yearly basis.
Becoming the master of your financial plan is a major step toward success. The more you embrace and own your financial plan, the better you can make it work for you. Whether you have a knack for numbers and planning, or if you’d rather leave the figures up to someone else, the only way your plan will be successful is if it’s meaningful to you. After all, the end result of your financial plan is living the life you want. (For related reading, see: How Financial Mistakes Can Lead to Future Success.)