A sample phone call between my mother and me.
Iye (“mother” in my language) can you put some money in my account,
(in Nigerian accent)
My son, why are you so careless with your money? Aren’t you a financial planning major? And you cannot even plan for your own finances!
(breathes in through teeth)
(receives Zelle transfer notification)
Thank you Iye! I promise I will budget this time.
(physically feels mother’s eye roll through the phone)
Something I have struggled to address over the years is that in the midst of learning about Financial Planning and Wealth Management there have been few positive changes in the way I handle my own finances. I could talk your socks off on value investing, Roth conversions, the difference between passive and active investments, or even modern portfolio theory. Despite, I’ve often been afraid to check my Wells Fargo app to view my own checking account balance, or much less, redownload Mint and actually address the issue. This unwillingness has inevitably led to my card being periodically declined.
I hope this story helps you recognize that one of the first steps we must take in our journey to financial freedom is to assess ourselves honestly. Further, for aspiring financial planners & wealth managers we must recognize that we are not simply working with spreadsheets. Clients are more than a financial independence analysis – they are people.
I have had the opportunity to be a part of a nationally recognized organization on my campus called Red to Black (R2B). R2B is a peer-to-peer financial coaching organization that helps students handle different financial issues. Serving as a coach has allowed me to meet with students one-on-one and discuss an array of financial issues.
In my second semester as a coach, I was meeting with a student who was struggling with budgeting. The student shared regarding the paralyzing feeling they felt when thinking about opening the app to their bank account. It was a crippling thought for them, but as I started to ask questions I began to see that the issue was deeper than the fear itself. They simply needed someone to let them know they were not crazy. Further, they needed to know they had the ability and resources to overcome that fear. After sharing these points, the student had a glimmer of hope in their eyes as they realized they could actually do it. [For the record, this moment keeps financial advisors going.] As I walked back to the Red to Black cubicle and started to prepare the follow up email, I audibly said:
“Yo! That’s me”
I am that student. I actually suck at my finances. I knew all of the answers to my retirement planning test but was miserably failing at my own personal finances. In that moment, I knew before I sought to become a “big-time” financial advisor I had to actually succeed on the hardest financial planning case study: myself.
So, what was my first step?
1. I dreamed. I asked myself what I wanted out of life? Where did I want to go? What did I want to do with my spare time? What things did I want? [Believe it or not, this is one of the most important parts of getting ahold of your finances. Without direction your finances will wander aimlessly.]
2. Next, I took those dreams and put a time period on when I thought they could be achieved. I used three categories: short term (> 12 moths), intermediate (1-5 years), and long-term (5+ years).
3. Finally, I created a monthly spending plan. This step might seem mundane. However, it is just as important as the goal discovery itself. Hopefully, you will begin to see that your spending plan is not built to restrict you, rather, it is built to empower you to reach the goals you have set. A good starting point is begin to list your monthly expenses (rent, utilities, phone bill, car insurance, gas, groceries, entertainment, etc.). Take this amount and subtract from your monthly income. The remainder is the amount you can begin to save. [If there is no remainder, look at the monthly expense list to see if there is any place you can cut back.] Once you have discovered an amount to save, consider creating an “emergency fund.” This fund should equal 3-6 months of your living expenses. This fund will help you avoid having to borrow money in times of unexpected need.
Beyond my own cash flow statement, this journey taught me a lot in regard to my profession. It showed me that financial advisors are, in a way, similar to counselors. We are here to help people navigate past trauma that affects their day-to-day financial decisions. Therefore, my challenge to financial planners is to first be honest with yourself so that you can have a greater sense of empathy for your clients. I too many times hear about the ignorance of clients and the decisions they make. Maybe, as a profession, we can work on our vulnerability with one another as a reminder that we also are not perfect. I implore whoever is reading this is to take the step to know your own finances. It might feel overwhelming, but the effort will undoubtedly help you counsel with more empathy and push you further down your own path to financial freedom.