The definition of financial security is “the peace of mind you feel when you aren't worried about covering your basic expenses, unexpected emergencies or your future financial goals”. And in my experience, the blueprint for achieving financial security is a combination of financial planning and financial control. Here are a few tips: • Live happily within your means • Take full financial control • Align your values with your money • Address end-of-life planning • Talk about money Ignoring money or mistaking it for a status symbol or a substitute for personal identity will create a vicious cycle. Either way it will feel like there is never enough.
Host – Teresa Mitchell, CFP ladymoneyllc@gmail.com
In my 20 years in the industry, I have had over a thousand conversations with women who have not felt they have reached their financial potential – usually in the areas of investing and subsequent financial security. I have found the key to moving forward from the image of bag lady to empowered lady is having a different kind of conversation with women than they usually experience with a financial advisor. It is about focusing more deeply on what matters in terms of family, community and life purpose. Approaching the conversation with compassion and a goal of honest, authentic connection creates a sense of trust that makes financial education and taking investment action not only possible but desirable.
To that end I left my longtime wealth management firm and am launching a personal financial coaching platform -- LADY MONEY, LLC. It is intended to help women achieve a sense of financial wellbeing around investing for retirement that imparts peace of mind and ultimately leads to financial security.
Resources:
Poem https://medium.com/@bobsutton/kurt-vonnegut-joe-heller-and-a-thanksgiving-message-8a31ca397888
Stressor https://www.cnbc.com/select/73-percent-of-americans-rank-finances-as-the-number-one-stress-in-life/
Teresa Mitchell, CFP:Values and money don't mix, or do they? Join me, financial coach, Teresa Mitchell to find out. Let's explore how women can make money while making a difference. This is Lady Money!
Welcome! Please join me for Lady Money Tips in Ten.
Our topic today is – Achieving Financial Security. Security gives women that precious feeling of peace of mind about the future.
The definition of financial security is “the peace of mind you feel when you aren't worried about covering your basic expenses, unexpected emergencies or your future financial goals”. I have written about the Golden Triangle of Happiness several times. It suggests that on-going wellbeing occurs when we have a high level of close personal relationships, a sense of purpose and feel in financial control. “Peace of mind” is the key. In this state you are free to focus on relationships and purpose – which for most of us is more meaningful than money. And in my experience, the blueprint for achieving financial security is a combination of financial planning and financial control. Here is a roadmap for getting there.
Having at least a rough idea of spending is an important part of feeling in financial control. If you find yourself in negative territory it might be better to look at the bigger picture rather than crunching nickels and dimes. Spending is complicated. It can simply be an unconscious habit. It can be an attempt to meet a deep emotional need. Or spending can support a lifestyle that in the end may not actually feel worth it. Studies have shown that, after a certain point, more money doesn’t lead to more happiness. So, the trick is to make sure the life you lead is the one you want to live. A new mindset can be a great motivation for making positive changes.
Even if you don’t have cash flow issues, understanding the basic human needs behind spending can still help you do a better job prioritizing. And exploring the issue may open up some interesting non-monetary options to meet those needs. Behavioral economist, Sarah Newcomb, combines psychology and budgeting in a whole new way in her book Loaded. She thinks that the traditional cash flow budget is incomplete because it fails to consider the source of the income or the deeper purpose of the expenses. Her model thinks of assets as a spring that provides a steady flow of income. Expenses should be traced back to a basic human need. This come from psychologist Abraham Maslow’s Hierarchy of Needs – which are...basic needs, psychological needs and self-fulfillment needs. People that think of money as an asset are in a better position to build wealth and create financial security. And connecting an expense to a need helps you decide whether the spending is essential. If it is, there may be a better way to meet the need other than by spending money.
So, thoughtful cash flow management is an effective tool for reaching life goals. For a sobering description of a life out of balance - even with positive cash flow - read Kurt Vonnegut’s little story/poem Joe Heller – Joe observes “I’ve got something he can never have...” The punch line “The knowledge that I have enough” is telling.
Feeling you have financial control frees you to focus on the important things in life -- such as relationships and life goals. Key components of financial control are -- an awareness of month-to-month finances, maintaining an emergency fund, tracking long-term financial goals, and having the freedom to make desirable choices in life. As an advisor I called this -- having a comprehensive financial plan.
Being on top of your monthly cash flow enables you to make sure you hit your targets for retirement savings. Maintaining an emergency fund not only gives you peace of mind but the option to take time off, change careers or start a new business. Setting long-term financial goals helps you make smarter decisions. And having meaningful goals motivates you to take the steps to get there. Your reward is peace of mind and the ability to live a life you choose.
Feeling that your spending, saving, and investing supports deeply held personal values increases your overall sense of wellbeing. Step one is always clarifying your values and life purpose. Our perspective changes as we develop and gain experience. So, I suggest you revisit your values annually or after a major life event. Think of your values as your compass. Money should be viewed as a powerful tool -- an effective means to a higher end. The best way I have found to accomplish this is 1) to be engaged with your financial situation and 2) to be clear on your core values. Getting them to work together on your “big picture” plan is powerful. Ignoring money or mistaking it for a status symbol or a substitute for personal identity will create a vicious cycle. There will never be enough.
It can be too late to make the best plans in the middle of a crisis. We all want an “all’s well that ends well” life that doesn’t fail in the last act. So, planning for the end of your life is not really an option. To go full circle, we talked about financial control as being one of the keys to happiness in life. It’s still true as you approach death. You may not be able to control your physical or mental health. But if you have planned well and made your wishes known, you will have a sense of control and the comforting peace of mind that goes with it. Thoughtful end-of-life planning will also be a welcome gift for your family and heirs.
Honest communication about money is critically important in relationships. In a 2021 survey by Capital One -- 73% of Americans ranked their finances as their number-one stressor. An average of 39% of marriages fail and the number-two reason is money. The taboo around talking about money is so destructive -- yet nothing seems to change. I think a lot of this has to do with attitudes developed in childhood. Money becomes a loaded topic -- but many of us don’t realize the old emotional baggage we carry. We don’t recognize the triggers that get us into trouble. It seems like common sense to view money as a means to an end rather than a status symbol. Or that we have enough money when we can comfortably meet our basic needs. But most of us don’t live that way. In the end it is about the close personal relationships we had and the purposeful life we lived. Not about the money.
Life never happens the way you plan it. So as things change your plan needs to be updated. As an advisor I reviewed a client’s financial plan with them annually or as major life events occurred. A good financial plan serves as the foundation for major financial decisions, so you want the assumptions on which the plan is built -- to be current and to be meaningful.
We all make mistakes – financial or otherwise. But if we have set meaningful personal goals, created a plan to achieve them and made provisions for things not always going our way -- life should feel secure and be rich and full. And by all accounts – our life should end well.
TIPS OUTRO:
Thanks so much for listening! I hope you found Lady Money – Tips in Ten, helpful. If you have any questions, you would like me to address,or if you want more information on the Lady Money financial coaching program or blog, check out the show notes. Or you can reach me, your host Teresa Mitchell, at ladymoneyllc@gmail.com.
Until next time, this has been Lady Money – where money and values do mix.