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Three Easy Ways to Start a Financial Plan

November 19, 2012

Why do only one-third of women have a financial plan in place? According to the Prudential Research Study on Women, the reasons include lack of time, the pull to meet shorter-term financial obligations, lack of knowledge, and an unmet desire for assistance and help.

There are also emotional reasons for women to avoid planning. In my work with women, I hear women tell me that feel overwhelmed why they think of dealing with money and planning. The planning process forces them to confront their fears and their insecurities. For example, you need to consider your future earnings and ability to care for yourself in retirement. That question feeds into many women’s deep-rooted insecurity about being alone and abandoned in their older years.

So what’s a woman to do? How can she cope with these fears and the feeling of drowning in detail and decisions? Women are masters at managing the multiple tensions in their lives. Don’t we deal with demands from kids, partners, bosses, dogs, cats and friends? Often, these demands are conflicting or force us to confront issues that we wish we didn’t have to deal with. Think of raising teenagers — that will put you into the scary zone really fast.

So, how do we do it? How do we cope with the thing that we wish we didn’t have to think about? Some of us try to ignore it all, but the issue always comes back to remind us it’s still there. Others try to control it, but our kids’ behaviour reminds us that control is an illusion. Then, there are those who accept that we have to face it and we do so a little at a time. Let me tell you what I mean.

My son is 16 and we have are having those tough conversations: drugs, drinking, sex, his future, our different views of life and his decisions. Sometimes, we get into heated discussions. Other times, we both walk away in frustration, wishing it were easier and less tough to deal with. But we always come back to each and to the conversation. Because we know we need to face the issue. Little by little, one conversation at a time, a few words here and there… we get to the heart of the matter. We struggle through our fears and our resistance to end up at a place that is better than when we started.

So it goes for your financial plan. You need to have that tough conversation with yourself, the one that scares you and that fills you with dread. You might try to ignore it or pretend you have control over it. But you know that you don’t or you’d have the plan and be working with it. So where do you start? Here are some suggestions:

1. Ask yourself what you fear the most. Is it that you aren’t doing as well as you think or hope you are? Is it that you feel helpless and out of control? Is it that you’d rather look at it another day, that planning gives you a headache and drags you down? These may all be true — but they’re also going to be true tomorrow, next month and next year. Ignoring your fears or running from them won’t make them go away. Do you want real control? Then grab it by looking at your fear and getting to the root of it. It’s not until you understand your fear that you can begin to get over it.

2. Start small. Sometimes the idea of a financial plan is just too much, especially if you haven’t given much thought to it. Start with thinking about your monthly expenses. Consider your fixed and variable expenses; in other words, what expenses do you have to deal with month in and month out? These are expenses you have to incur no matter what the situation. The variable expenses are things you have control over. Look at your assumptions about what you consider is a fixed expense — is it really variable? Make sure you write everything down. You’ll be surprised at how much spending you can control.

3. Learn one thing about your finances this month. Don’t try to learn everything there is to know about financial planning and investing. Pick something that you’ve wondered about and that you think could help you. If you have a car, find out how much you spend yearly on your car. Look at your fuel costs, maintenance, and insurance. Don’t forget to add in all the little things — the car washes, new tires, detailing. You’ll be surprised. If you don’t have a car, what do you spend on transit and cabs? Track your spending for a month and then multiply by 12. Can you adjust your spending?

You need to do this because you need to get to a better place than you’re at now. Nobody will care about this as much as you do. Make the time.



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