Last week I had a one year review meeting with a client; and when I asked her if she wanted to continue to work together, I assumed she would say no because she had accomplished all of her goals and was on the right track. I was shocked when she said she wanted to continue to work together because for the first time in her life she felt as though she had control over her money, and she wanted to keep it that way.
“It’s all about control and I’ve got lots of it.”
This is what Janet Jackson says about two minutes into this video, but I wonder how most of us feel in regards to control over our money. One of the reasons why I became a financial advisor almost four years ago was that I felt out of control with my money. I was making plenty of it, but my financial life seemed like a puzzle with pieces all over the place. My husband and I were making financial decisions all the time but yet they didn’t seem to come together.
At first I wanted to hire someone else to figure out my financial life, but when I couldn’t find the right advisor, I decided to become the advisor I wanted for myself. With my training, I started to finally feel in control of my own family’s finances. If you feel out of control with your money, I guarantee that you are not alone. From my perspective, there are five areas where we fall out of control with our finances.
1) Big Picture Control
People who lack big picture control make financial choices all the time and most of the choices are sound; however, it’s hard to see how they will all come together. The best way to gain control is to stop and review all of your financial pieces and try to put them together. Ask yourself why you made the choices you made and where you expect them to lead. If you own a home, why do you own the home and what do you plan to do with it? If you are saving, what are you saving for?
The more clearly you can define where you expect to go over the next two, five or ten years, the clearer your big picture will become and you can put the pieces together.
This lack of control is one of the main reasons why people seek the help of financial planners. They are looking for the financial planner to put all of the pieces together; and if you’re having a tough time doing it yourself, then I highly recommend seeking the help of a financial planner. Sometimes it’s difficult for us to see the big picture because we are too caught up in the details and we need an outside party to help us gain perspective.
2) Spending Control
I think most of us at points in our lives have to figure out how to gain control over our spending. The biggest challenge with spending issues is that they are typically emotionally driven, and unless you deal with the emotions that are driving the spending, it will be hard for you to gain control.
I recently met with a client who has spending issues and we talked a lot about dealing with the behaviors and how to change them. If you have a tough time managing the emotions, then make a physical change. Make it difficult for you to spend money so that hopefully by the time you go to spend it, your emotions will be in check. One step that this client is going to take is removing all of her payment information from websites where she typically spends money. She is confident that the inconvenience of having to retrieve payment information will help her control her spending.
Another way to gain control over your spending is to replace your spending with something more important. I used to have a spending problem until I realized that my goal in life was to help other people. If I wanted to make this career change, I needed to spend less so that I could earn less. This goal was so important to me, though, that I didn’t miss the spending because I knew I replaced it with something significantly more meaningful.
3) Saving Control
People who can’t control their saving typically have issues because they don’t know how much to save and they don’t know how to save. My clients all get the goal of saving at least 15% of their gross income, and when they first see this number, they freak out and think it’s an impossible goal. It’s not an impossible goal, they just set their past goals too low. Even if you’re up to your eyeballs in debt, you should think about taking on other jobs and earning extra income to make this number a reality. Your savings is your future so if you get control over anything, I would hope it would be your future.
I also advise clients to automate their savings goal where they set up autodrafts from their checking accounts to other savings accounts. It sounds so basic, but this is half the battle. If you don’t see the money in your account, you are less likely to spend it. My clients have saved hundreds of thousands of dollars over the last two years through automation alone.
4) Investing Control
Some people have complete control over spending and saving but have no idea how to gain control of their investments and the common issue here is a lack of education. If you fall into this category, I really can’t blame you for feeling uneducated or confused because most of the investment information out there seems to be written in a completely different language.
Before I became a financial advisor, I had no idea what an ETF was and why I should even care about asset allocation. It took me months of training before I could figure out how to convert the knowledge into a language I understood and could explain it to my clients. I think that there are plenty of bloggers out there who explain investing well. I also recommend podcasts for educating yourself on investing because sometimes it helps to hear the information rather than just reading it.
5) Income Control
We would all like to make more money but what most of us don’t realize is that we have the ability to be in complete control of this situation. I advise clients all the time to research job opportunities and understand the true value of the services they provide. If you are at the top of what you could earn in your current job, then think about picking up side hustles or outside jobs. I take on side hustles all the time and while I may give up sleep, I feel better about the control that it gives me to make more money.
If you are feeling out of whack with your money situation, it’s probably because you don’t feel in control over some aspect of it; and I encourage you to address this sooner than later. The longer you wait, the more stressed and out of control you will remain. Gaining control of our finances will not only lead to more money in the bank, but also less stress in our lives along the way.