We’ve all thought it before: if only it was easier.
This line of thinking doesn’t apply to any one thing; most of us consider it at many different points in our lives, and for as many topics. But I’d wager it comes up for one topic more than any other: finances. Personal finances can be a complicated, headache-inducing endeavor that makes many people give up before they even try.
But it doesn’t have to be that way.
Like many of those other things in our life, we can simplify the situation to make the most of it. We can look at it in different ways and try to expand our view while simultaneously making it easier to understand and deal with. Numbers don’t have to be scary, and finance doesn’t have to be a terrifying subject. Our balance sheets can make cents and sense.
Let’s start with the basics.
Rather than break down complicated financial topics, let’s learn some principles that will serve us well in all financial aspects. Personal finance can certainly be made much more manageable with simple precepts taken from other aspects of life.
For example, self-control. I know, we’ve all heard this one to death everywhere. It’s usually in the context of diet; see a brownie but trying to control your weight? Self-control. Don’t want to exercise but know it’ll help you reach your goals? Self-control. It comes up in our everyday finances too—want that new TV but can’t afford it? Self-control.
We often, admittedly, find the concept a bit annoying. Self-control is another way of saying personal discipline. It’s often easier said than done. Those brownies you’re resisting really do taste good; the TV would look great in the living room. But it isn’t called discipline for no reason. It’s called that because it genuinely takes work and commitment. It takes a drive and is a skill that can be practiced and honed.
There is an art and a science to understanding and practicing delayed gratification. One of the ways we get into financial trouble is with over use of credit cards. Why wait to buy something when we have the money when we can buy it on credit and pay it off over months, possibly years? Where’s the harm? The harm is in interest rates that you don’t need to pay if you delay the purchase until you have the necessary funds. The harm is in paying off items over a long term and possibly hurting your credit score with delayed or delinquent payments. If you budget and have a good financial plan, you can have your cake and eat it too. But this takes patience, and that takes practice.
Another one related to self-control is to take care of your health. This might seem odd in a story about personal finances, but it has a concrete point. In our health care system, it isn’t hard to rack up thousands, possibly hundreds of thousands of dollars in debt for health problems that are preventable. To be clear, not all expensive health ailments are preventable. Far from it. But our understanding of common chronic conditions like high blood pressure and many other physical challenges tells us these problems can be mitigated with diet and exercise.
We often don’t realize how much we spend on health care until we’re in the hospital for a broken bone or an injury we could’ve avoided had we been more careful. If we smoke, drink heavily, and eat poorly, our insurance premiums can rise as a result, taking chunks out of our earnings and delaying the financial incentives we want out of our lives. I know of too many cases of retirement plans being adversely affected by unexpected health expenses. It only makes sense to do what we can to avoid preventable health conditions.
Understanding the health care plans available to us is an onerous task, but one that we do well to pay attention to. Is it complicated? Yes, it can be. But since we’re focused on simplifying the hard details, let’s dive in. Be sure to explore the health plans offered by your company, if applicable. Don’t just pick the cheapest one, or the most expensive just because it sounds fancier. Take an honest stock of what each plan offers, what your contribution will be, and what you’ll get in return. Take the time to chat with an HR or benefits administrator, if available, at your company to understand the upsides and the downsides of each plan.
It can be easy to “tune out” when selecting health insurance. It’s not exciting, and can be confusing. For those of us without chronic health conditions or known ailments, health care and plan choice can seem unimportant. But, if our health changes through disease or accident, the choices we made can have a huge financial impact. We can prepare for possible problems later on, and head them off before they become a financial burden that delays our retirement or our financial independence and future.
Our good health and our retirement are closely linked. We want to be healthy and active and financially secure in our retirement age. Also, we should start saving for retirement when we’re younger. Starting in your 20s has always been a safe bet that pays off. The longer horizon you give yourself for financial preparation is best. The more you have accrued, the better you can handle the unexpected aspects of life while preparing for the ones you’re looking forward to.
We often see self-help books and inspirational mottos telling us to “take control” of our lives. Take control of what’s wrong, take control of our problems, and solve them by controlling the outcomes. It’s become a cliché to take control, but it applies here. It might be the most important item on this list. Taking control, and thus concurrently taking an active interest in your finances, is essential to every aspect of planning. There isn’t any part of a financial plan that doesn’t involve control and maintenance; every part of finances will reward you if you are observant and curious.
The most common term for this is budgeting. Having a definite breakdown of where your money goes, and what percentage you spend on different things throughout the month, helps ensure you’re paying attention to the details. It helps show you what you have, what you want, and most importantly, where you could be. Small savings in the short term add up to big savings and large wealth creation gains over time.
Control also takes the form of letting someone help you. As counterintuitive as that may seem at first, it makes sense on reflection. We let doctors help us with health, dentists with our teeth. Bankers help us safeguard our money. We let many important aspects of our lives be advised on and sometimes handled by outside services or individuals.
Financial planning and wealth protection is no different.
A good financial advisor can help format a plan that not only guards your wealth but helps create it. Unbiased, objective advice goes a long way in this field. We often get emotional when we see our balance sheets or our finances and budgets. How can we not? It represents not only our financial lives but our options in life as well.
A good financial advisor works like a coach. You will still do the work, but the advisor can help give you guidance and a different perspective on your financial situation.
Patience, diligence, and curiosity are vital characteristics if we want to be financially successful. If we want to control our personal finance and to take charge of our lives, we have to be ready to commit time, money, and energy to this process. We have to monitor it closely, pay attention to details, and always question where things go and what decisions we’re making. We have to have self-control while being able to understand our decisions critically. We need to make changes in light of evidence and find a better path if it’ll help us achieve our goals.
With these simple principles in mind, it isn’t hard to improve your financial standing. And it isn’t hard to simplify the processes that often stress us out. We just need to remember the basics and let that guide us. With the right understanding and expectations, we can make the switch from financially unsure to financially prepared. With the right mindset, we can put the personal back in finance.
