His vision for starting GWS was to deliver investment strategies and wealth management services typically available at the highest levels of wealth. Today, clients benefit from these sophisticated financial services targeted to meet their unique needs.
Much like getting in shape by losing weight or working out more, living a healthy financial life is easier said than done. When it comes to understanding and feeling confident about finances, many can feel overwhelmed. That’s understandable because when you think about all of the things that have a dollar sign that affect you – like saving, investing, insurance, estate planning – there’s a lot to consider.
The goal of this series is to remove the ‘financial fear factor’ and replace it with a roadmap and valuable resources to start you on your way to building your financial plan.
In my 20 years of advising clients about their money and finances, I have found that the two biggest barriers to getting financially fit are time and knowing what to do and where to start. Our clients include busy professionals who work long hours, especially those who live in the DC metro area. The demands of their career and family leave little time to know how to manage their finances. While we remove most of this burden from our clients, we still encourage them to learn more about personal finance and be engaged in their own financial situation.
Listen to Barry Glassman’s WTOP interview: The Best Practices for a Healthy Financial Life: Getting Started
So, my first piece of advice is to take a day and “hire yourself”. Sometime in the next few months, set aside a day to learn more about your personal financial situation. Let’s face it; most people would rather do almost anything on a personal day than think about their finances. But the things you will learn in just that one day will have a tremendous positive impact on the rest of your life. That’s not a bad tradeoff.
Get started with a cup of coffee and a good book:
I recommend that you start out with a healthy breakfast; your brain will operate better when it has fuel. (I know mine does.)
Next, take a couple of hours to skim through a good book about personal finance. The goal isn’t to become a financial expert in a few short hours, but to learn more about what you do and don’t know about your financial situation.
Two books that top the list that I give to my clients include one that’s been around for a long time and one recently published. The first, Rick Edelman’s book, The Truth About Money is a comprehensive look at everything about personal finance. But it’s not just numbers and calculations. It’s a road map with reasons to help you gain a better understanding of your money. The book starts with a quiz to show you how much you already know or don’t know about personal finance. This makes is easy to skip the chapters where ‘you got that,’ and focus your attention where you need the most help.
While it weighs in at 86 chapters, (don’t let that scare you off) Rick does an excellent job of steering you to the information most relevant for your situation. He includes a handy “How to Use This Book” guide broken out by circumstance or need. For instance, he suggests that those who are in debt should read the chapters, Three Ways to Create Savings; Understanding Your Credit Report; and How to Get Out of Debt. He makes similar suggestions of specific chapters for those who are married, single, retired, aging, etc.
The second book is The Charles Schwab Guide to Finances After Fifty: Answers to Your Most Important Money Questions written by Carrie Schwab Pomerantz, the daughter of Charles Schwab. You would think that she would know a thing or two about money and investing being raised by the man known for breaking down Wall Street barriers and giving individual investors affordable access to the markets.
This is a must-read for anyone approaching, or in their 50’s. She does an excellent job addressing the financial issues many face in this time of life from putting kids through college to realistic ways you can still save for retirement if you really haven’t started yet. She tackles these and other tough topics with straightforward advice and useful resources. You’re left knowing a lot more about what you can, and should be doing at this stage of life, and why.
Take a break: Digest what you’ve learned while digesting some lunch.
After lunch, take a few minutes to make a list of what you learned and what you still have questions about. Include the issues that you believe you still need to address, like saving for college or reviewing insurance. This list will be the basis for setting your goals – something we tackle in my next article.
Spend your afternoon getting to know your numbers:
Devote the next few hours in the afternoon doing two really important things – tracking your spending and knowing how much you are worth.
Do you really know where all of your money is going? If you’re like my wife and me, and most of my clients, the answer is, “Not really.” It’s the everyday expenses or habits like spending $100 every time that you eat out (and doing that more frequently) that are the stealth budget busters that quickly add up.
That’s why I recommend you begin to track your expenses. It’s so much easier to do now with tools like Quicken.com or Mint.com. These short (less than 2 minute) videos show how easy it is to use Mint.com:
Quicken also has videos to help you get started like: How to Manage Your Personal Finances With Quicken. Their website is full of short articles and great tips like How to Budget for Your Dream Vacation to 20 Small Ways to Save Big.
To get a good look at your spending habits and where your money is going, start by inputting your expenses for the past 6 months to a year. Not only is it an eye-opening experience, it’s an essential step to living a healthy financial life.
Think about it this way. What if all of the food that you had eaten over the past year was laid out on your living room floor? You wouldn’t need a nutritionist to tell you that you have a snack food problem when you see the enormous mountain of Doritos in front of you.
The same is true of your spending. When you see exactly where your money is going, whether for shopping, eating out, or just too many everyday indulgences, you’ll know right away where you can cut back your spending or re-prioritize to save more.
Next, it’s time to take a good look at what you own and what you owe by creating a net worth statement. Even if you think you “know” your financial picture, it’s still important to see this on paper. Your net worth statement is simply a list of all your assets, like bank and brokerage accounts, retirement accounts, the value of your home, car and other possessions, etc., and your liabilities like outstanding credit card balances, your home mortgage, car, or student loans, etc. The difference of the two is your net worth.
Knowing your net worth is the key to establishing your personal financial goals. It’s a baseline for measuring your progress as you work to meet your goals. You may have to do a bit of digging to find this information, but start to collect these documents now, so that most of your hard work will be done before you begin.
If you’re not sure how to create a net worth statement, Charles Schwab MoneyWise is a great resource. Download their Net Worth Worksheet to help you quickly and easily calculate your net worth.
Wrapping up your day:
By the end of your “Hire Yourself” day you should have accomplished the following things:
- Confirmed the things you know and what you’ve got covered
- Learned what areas of personal finance that you need to spend more time on
- Made a list of issues that you still need to address like creating a will, establishing a college savings plan, saving more for retirement, etc.
- Examined your spending habits and set up a way to track it going forward.
- Calculated and faced your net worth whether it’s good, just okay, or needs improvement.
It’s about now that most people who take a day to “hire themselves” start to feel empowered rather than overwhelmed. Getting your arms around your finances is like getting a hug. It’s reassuring to know where you stand because then you’ll know what you need to do next rather than worry about all your loose financial ends.
My next article in The Best Practices for a Healthy Financial Life: Setting Attainable Goals., I’ll help you to set financial goals and prioritize what’s most important vs. what’s most immediate. I’ll give you lots of links to resources to help you get the help you need.