January is so named because it is the month of Janus, the Roman god of beginnings, transitions, doorways, and endings. If there were ever a month to get over your fear of financial planning, then, January would be it. And although it is now almost March, there is still no better time to get started!
What Makes Asset Management So Scary?
People avoid organizing their finances for numerous, complex reasons. Countless careers have been built trying to understand the psychology of money and yet the field continues to grow. Despite this complexity, certain themes come up again and again.
Financial planning is often described as intimidating. Individuals (errantly) imagine budgeting to require Rain Man-esque mathematical abilities and they worry about what may come of their calculations. No one relishes change, after all, especially when it is driven by the realization that you’re behind on reaching your economic goals.
People also resist asset management because engaging the subject means engaging with future unknowns and the unknown, like change, is scary.
Lastly, financial planning is frequently ignored because people overestimate the time it takes.
Five Steps to Organizing Your Assets
All of the above are manageable with a simple, step-by-step plan. Asset management can be empowering—instead of overwhelming—if broken down into chunks and tackled little by little. Here’s how:
- Evaluate Your Position
You can’t plan your finances if you don’t know where you stand. Step one is thus simply to get things in order. Review account statements from the last six months and determine cash flow in and out. Look for patterns and irregularities and aim to pin down why things went awry when they did. Upon the basis of your findings, build a prediction of what your finances should look like over the coming six months.
- Construct a Budget
Once you know how much cash is coming into and out of your financial accounts, you can construct a budget that allows you to set and achieve your goals. Begin by determining how much you can save and follow this by deciding where to invest your savings. Financial planners often recommend establishing separate accounts for separate objectives. A vacation fund, new car fund, or house down-payment fund, for instance, will do wonders for your motivation.
- Take Bumps in Stride
You know what they say about best-laid plans…
All the organization in the world can’t save you from bumps in the road and this is OK. If your plan goes off track, if you fail to keep up with contributions, if a major expense sets you back, don’t worry. Life is full of disruptions but that doesn’t mean planning is wasted energy; instead, it just means that your intended route isn’t as direct as you’d imagined. Stay the course long enough, though, and you’ll eventually get where you’re going.
- Play the Long Game
A short-term financial plan helps you achieve short-term goals but enduring financial success requires taking a wider view. If you don’t already have an estate plan, now is the time to get one. Taking steps to secure your retirement, your access to long-term care, and any inheritance you wish to leave your loved ones provides you not only peace of mind, but a baseline upon which to calibrate other goals.
- Enlist Help
Evaluating your present financial position and building a budget is something you can comfortably do at home; successfully charting long-term financial goals is not. Insight from an experienced financial planner and estate planning attorney is key if you want to get the most out of tax legislation, retirement strategies, and long-term care planning (to name just a few complex subjects). While professional help inevitably comes at a cost, this pales in comparison to the savings benefits it provides.