The Personal Finance Puzzle

The Personal Finance Puzzle

By Andrea Thompson, CFP, CRPC, CLU, CHS, CDFA

We all went to school and learned the basics: reading, writing, and arithmetic. And yet, what about the life skills we also need when it comes to basic financial literacy? This includes knowing everything from how to manage credit card balances to saving for your first home to applying for a mortgage. I call these “adulting” skills.

These skills start out small, like knowing how to contribute regularly to a bank account when you’re beginning to save. As you grow older and life becomes more complex, however, your needs can quickly grow into a jigsaw puzzle with too many pieces – and no picture on the front of the box! How do you begin to piece together all the financial literacy skills you need? How do you know where to start? How can people learn these skills to adequately make decisions about money in a comfortable and low stress way?

Traditionally, education on personal finance was thought to be the responsibility of the parents. Whatever knowledge and programming people had from their elders was passed on down to their children, and so on. The lessons of yesteryear become the lessons of now. I’ll often hear clients talk about their views in the eyes of what their parents did with the desire to emulate those actions.

This remains true even though we now have the world of knowledge at our fingertips through the internet, though this can create problems of its own. The thousands of websites, forums, articles, and videos available to help teach us about the things we don’t know can feel like a bit of a rabbit hole when trying to understand who or what we should turn to. What information sources are reliable, accurate and trustworthy? Which ones are click bait?

Perhaps most importantly, there are professionals who can assist in guiding your financial journey and educate you on the pros and cons of the decisions you will need to make along the way. However, certain industry experts and companies tell us that advice should be ‘low fee’ or free. Many people are reluctant to pay a financial professional as they don’t understand the value of professional advice. Also, with so many different types of advisors – from insurance agents to mutual fund dealers to bank branch advisers – it has become more and more difficult to know who you can trust.

It’s no wonder that people are feeling lost. So where do you start?

Let’s try to work on your financial puzzle. Here is a project (call it homework!) that I’d like you to try:

  1. Gather all your puzzle pieces. Assimilate a personal inventory of everything you own and owe, from credit cards to mortgages, to bank accounts, insurance policies and investments. Put everything on the table. Dig out every statement, even if it’s from 2012.
  2. Figure out what the picture on the puzzle box looks like. What are you trying to accomplish financially? Write down all the things that you’d like to achieve and put some time frames around them. Be as specific as possible.
  3. What is the highest priority item that you wrote down in the last question? Try and create an order from most important to least. Is it paying down the credit card within a reasonable time frame? Buying a new house within 3 years? Refer to your puzzle pieces if needed.
  4. What does your relationship with money look like, and how has that been shaped? To date, what has been the biggest hindrance to accomplishing your goals? How much time and effort have you put towards solving them?
  5. Have a financial meeting (whether it’s alone, with your spouse, or other loved ones). Communicate clearly and directly about the exercise that you’ve just gone through. Listen. Talk openly. Write things down. Do this every month.
  6. Educate yourself. Take the time to make your finances (and yourself) a priority. What is it that you want to learn about? Which resources are trustworthy? Spend some time reading – there are many great books on financial basics. Two I would recommend are The Wealthy Barber by David Chilton to Recalculating by Darren Coleman.
  7. Seek expertise. A Certified Financial Planning Professional (CFP), Chartered Life Underwriter (CLU) or Registered Financial Planner (RFP) can help you navigate the waters if you’re feeling overwhelmed.

If I can leave you with one thought, let it be this: Leave all blame for past financial decisions behind you. Develop a better relationship with money through understanding, interest, and attention. Start fresh and turn over a new leaf – it’s never too late!

About the author

Andrea Thompson, CFP (CAN), CRPC (US), CLU, CHS, CDFA is a Senior Financial Planner at Coleman Wealth of Raymond James Ltd. She is also a mentor for various programs under Advocis, including the PFA program and the Getting Established program.