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Why do you neglect your finances?

In the years that I have worked as a financial adviser I have come across a very interesting trend that always perplexes me.  People routinely avoid their finances.  They understand that managing their finances is important but for some reason they often neglect them. This doesn’t just occur at certain levels of wealth but spans all income and asset brackets.  This avoidance not only has an impact on these individuals today but has a long term effect on their financial security, and potentially their children’s, for the rest of their lives.  Even more interesting to me is that almost everyone I talk to knows this.  They know they should think about their finances more and plan for the future.  They know they should take steps to reduce their taxes, save more or implement an estate plan but they still fail to take steps to do this. So, the big question is why?

The simple answer I hear most is procrastination, but procrastination isn’t a reason. Procrastination is the way you avoid your finances not the reason why. Why do you procrastinate then?

  • Fear: You know you should be doing something about your finances but you don’t want to honestly evaluate them because you are scared of what you will find.  You know you are behind. You know you should have been doing more. You think that by avoiding them then you don’t have to face and accept the problems that you have created and admit your missteps. Ignorance is bliss. These emotional responses to your finances and managing your investments are normal. The problem is that avoiding them doesn’t make them go away, it just makes them worse.
  • Time: You look at managing your finances as a time consuming burden. Thinking about them is daunting and seems like a huge project. However, there has never been a time when doing financial planning has been as streamlined as it currently is. Whether it’s hiring an adviser or using an intuitive online solution, the financial planning process has become simplified and there are solutions to fit any level of involvement desired.
  • Knowledge: Similar to above, you see managing your finances as a daunting task because you feel you lack the knowledge base to make smart financial decisions. Whatever your sophistication level, there is a solution available to overcome this barrier. Financial information has never been so readily available. No matter what level of advice or information you need there is an adviser or online resource that can help.
  • Don’t have enough money: This is an interesting one, but one that comes up often. You don’t feel you have enough money to warrant spending time thinking about it. I have come across this excuse with people that have no money and those that have millions of dollars. The interesting paradox is that you don’t want to focus on your finances because you don’t think you have enough money but the best way to have more money would be to focus on your finances.

Now, as a financial advisor, this would be the time when I should say that an adviser can help you solve all of these issues. While that may be true, overcoming these obstacles can and should start at the individual level.  Whether you decide to seek outside council or pursue your finances on your own you must first identify which of these roadblocks is holding you back and realize that avoidance is only making the issues worse.  The longer you neglect your finances, the harder it becomes to get back on track. Additionally, the emotional and financial burden that you must overcome only gets bigger as time passes.

The good news for anyone who has been neglecting their finances is that you are not alone.  You are in the majority. Start small if you have to. Speak to an adviser, open an account with a robo-adviser or just start getting your finances organized. You have to start somewhere, and even small tweaks in your savings and investment plan can have a drastic impact on your future.

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The Brave Report- Oct 2016

Our most recent market commentary is up: The Brave Report- Oct 2016