Financial Geekery

systematically solve your financial problems, part 4

September 4, 2012

So: you’ve identified the problem, chosen a system, and established criteria for success. Now all that’s left is to implement the system and wait for success to find you, right? Well…no. As I mentioned last week, every system is an experiment, so as with all experiments, you need to periodically review and tweak your system.

 

This is what trips most people up. Once a plan is in place, they feel this rush of relief, almost as if they’ve already beaten whatever problem they’ve come to solve. So they go on their merry way…and are completely blindsided when their system blows a gasket or simply fails to start. No, every system needs regular care and feeding, whether it’s weekly, monthly, or even yearly.

 

Example: a budget. You get tired of not knowing how much money you have to spend, so you sit down one day, go through your receipts, and come up with one. All the numbers add up, everything looks great…until next month rolls around. You find that you overspent on eating out, so you grit your teeth and resolve to underspend by that much the following month. But that month you have friends in town, so of course you eat out even more, and find yourself hundreds of dollars in the hole…and you give up. It just wasn’t working for you.

 

Well, of course it wasn’t! Remember: every system is a continual experiment. Instead of just throwing up your hands, tweak your system. Maybe you need to allocate more money to eating out. Maybe you need to switch to the envelope method. Whatever it is, it’s almost guaranteed that you won’t get it right the first try…and what works today may not work a year from now. No budget is ever exactly on target, and there is no such thing as a “normal” month; what makes budgets work is when you sit down each month and adapt your budget to Real Life. (By the way, YNAB is excellent at this sort of “rolling with the punches”.)

 

Or maybe you decided that making a budget was exactly what you and your spouse needed to see eye-to-eye. So you sit down, make a budget, explain it to your spouse, they agree…and then promptly blow it out of the water the next time they see a sale. You could give up…or you could tweak your system. A “monthly money date” is an excellent way to make sure you and your spouse are on the same page re: finances. (Oh, and the system of “just not talking about money at all”? That won’t work. I promise.)

 

Now, this sort of thing doesn’t come easy to most; we’ve got lots of other things to worry about, and taking time out for our finances doesn’t often make the priority list, even when we know it should. This is where financial coaches really shine. I’m not talking about normal financial advisors, who are mainly interested in selling you insurance and investment products; I’m talking about the ones who work with you to create and maintain your financial systems. Like a personal trainer, they not only give you the information you need, but they also guide your development as you grow, regularly reminding you to tweak your systems — from budgeting to investing — and giving you ideas on how to do so.

 

Unfortunately, while you can’t throw a rock without hitting a financial advisor, the kind of financial coach I’m talking about (who often does financial advising and then some) is a bit trickier to find. There is my own practice, of course, and I’d be delighted to work with you. also, I highly recommend my friend Jennifer Jaime, a CPA and excellent financial coach.

 

Whether you get an expert to help you or no, remember this: financial success — or failure! — rarely comes from a single decision. Rather, it comes from your systems, and the day in, day out decisions that come from them. Care for them consistently, and you’ll get where you want to go.

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