Focus on Financial Wellness in the New Year

January is Financial Wellness Month. You might wonder why there is a month dedicated to the financial aspects of wellness?

Here are a few data points (1) that allow us to understand why financial wellness is such an important part of overall wellness:

• 70% of workers say that financial stress is the most common cause of their stress
• 60% of households don’t have three months of savings on hand
• 35% of workers have debt collections reported in their credit files

(1) Data reported in the slide deck “The Case for Financial Wellness” as part of my 2018 certification in financial wellness from the National Wellness Institute and the Foundation for Financial Wellness.

In my graduate coursework at Northwestern University (in Counseling), I am again and again reminded of the importance of relationships in overall wellness but also in mental wellness. Having our finances in order and communicating clearly about finances is essential to the wellbeing of our relationships.

Unfortunately, almost a third of adults with partners (31%) report that money is a major source of conflict in their relationship.

How can we heal this problem? To keep things simple and manageable, I’ll provide a five-step process that will help you increase your financial wellness this year.

1. Ensure that you have a basic level of knowledge about financial issues.
2. Get organized
3. Use the mantra: Purpose, Plan, Product
4. Share the Tasks
5. Communicate and Connect

Tip #1: Ensure that you have a basic level of knowledge about financial issues. I wish this kind of education were part of every curriculum, from Elementary School through Graduate School. Shouldn’t every high school kid know how to create a check register? Even in my MBA program, I did not learn much about budgeting or personal investing. Terms like 401K, IRA, Roth IRA, Mutual Funds, Indexes, Annuities- we have to learn them on our own.

If you are not feeling like your knowledge about finances is where it should be at, you can learn a lot from books (or books on tape) about this topic. Search the works of Dave Ramsey, Suze Orman, and authors recommended on book lists like this one or this one. One of my all-time favorite books on financial planning was written by my aunt (Candace Bahr) and co-authored with Ginita Wall, It’s More than Money-It’s Your Life! The book title says it all. When I talk to my aunt (who is now retired) about money, she constantly reminds me that it’s really about what you want to use the money for (see more about how PURPOSE should always come first, before planning or product).

If you want to go further, you can hire a coach, talk to a professional at the Foundation for Financial Wellness, or even hire a professional to help you with financial planning. Group classes are offered periodically by Barbara Hudson (formerly Stanny) who I love. The nonprofit organization, WIFE, also provides education in the form of excellent blog posts/articles and Second Saturdays workshops.

If you hire an individual financial planner, my one caveat is that you don’t enter into an agreement where compensation is based on % of assets managed. I prefer an hourly arrangement which means that the person is acting as a true consultant/coach/advocate for you, not trying to sell you product. More on that below in tip #3.

If you have kids, you can start them on their financial education journey at a young age. Elementary and middle school age kids can learn about saving, compounding interest and avoiding debt. As kids get older, you can work with them on investing money (we have an “investment club” for our own kids) as long as you make sure to have a little fun along the way!

If you are a woman, be aware of the special considerations. In this excellent article (Planning for the Inevitable) by Ginita Wall, she reminds us that women on average women will be financially on their own for one third of their adult lives.

Tip #2: Get organized. When I was getting my certification in financial wellness, I learned how unorganized (!) I was as related to my own finances. YIKES! Life is flying by, kids are getting older, and our documents are out of date. My coursework for financial wellness covered the following five areas (and for each area, I suggest a way to get organized):

• Budgeting. Do you set a budget each year? (or every quarter/six months?). If not, this is your year to start. Get a budget in place (here are some templates to get you started).
• Investing. Are you saving your money and investing it? I am not an investment professional or expert, but I follow the basic rules of allocation and try to put aside (save and invest) as much money as possible. A resource that is easy to read is the Motley Fool.
• Risk and Insurance. Insurance is expensive but important. A place to start is to list out the insurance policies you have (include the amount of coverage, term, policy renewal date, and beneficiary.
• Taxes. Don’t mess around with the IRS. Hire a CPA and get help around tax day, or days if you are paying quarterly. Get deadlines on your calendar now (at the start of the year).
• Life and Legacy. Here we are talking about estate planning and retirement planning. More on that below.

For proper estate planning (think about estate planning as “planning for death”) (2) I suggest hiring a lawyer with estate planning expertise (and licensing) in your state. Ask friends and family for recommendations. You’ll want to put in place, at a minimum 1) a will and 2) power of attorney for end-of-healthcare or medical directive. Talk to your attorney about the need for a revocable trust, which is a private document (as opposed to a will, which is a public document).

(2) Not to be a bummer, but we can’t hide from the “death” topic forever.

Retirement planning- This should be more fun; it is about planning for life!

Tip #3: Use the mantra: Purpose, Plan, Product.  Now that we are talking about planning for life, we want to make sure that we have the money we need to live the kind of life we want. A lot of times in financial planning, people run right to the product part of the formula, investing in a mutual fund or buying an annuity product. I like to “zoom out first” There is a huge difference between financial planning and management of assets.

Having goals that support your purpose and plan allows you to be better at celebrating things along the way. When we learned about debt reduction in our course, we learned that there is no one right way to do it. Sometimes it is a matter of paying off the debt with the highest interest rate. Other times, you can pay off the smallest debt first, because that will create a reinforcing positive behavior (success begets success). 

Success is based on what you think is important, not what anyone else thinks. Even when I was just saving a few hundred dollars a month back when I was saving up for graduate school, I celebrated every month when I put that money into my savings account. I felt great about myself and my relationship with money. Your purpose and plan should not be striving for the undefined “more, more, more” –that gives you little to celebrate about and a lot to tire you out. Here are some more concrete tips:

• for your purpose, consider using a vision, mission and values framework (create this for you/your couple unit/your family)
• use SMART goals in creating a plan
• then when it comes to buying product, things will be driven by the above two discussions.

Tip #4: Share the Tasks. If you are in a relationship, money must be a shared responsibility. (More on communication and connection, below). The simple act of paying the bills is something that can be stressful and annoying, so make sure to rotate this task! One idea is to rotate the responsibility each month. Another is to rotate every other year so that each person can get a sense of the “cadence” of bill paying (taxes are paid in April, insurance is due each September, etc.).

One thing that my hubby and I did as we started to share the tasks was to understand more about the perspective of the other. I highly recommend taking an assessment to learn more about your own “money profile” as well as the profile of your partner. We all have a whole life background of beliefs and values, mostly which stem from childhood, that is brought into our adult relationships with money.

The two assessments I recommend are:

1. MoneyType Assessment (free).
2. https://kathleengurney.com/moneymax/MoneyMax Assessment ($29.95 fee)

Remember, there is no one right outcome or profile to these assessments! My hubby and I shared and discussed the answers, and the true value was in the process. Grab a glass of wine, light a candle, and make it a chance to celebrate how you are planning your life together.

And that leads to…

…Tip #5: Communicate and Connect. Money can be a stressful topic for most people, and it causes a lot of friction in relationships. Sweeping the need for open and deep conversations under the rug and/or having vague or oblique conversations is a recipe for conflict and distrust.

So make a pledge to be more open and communicative about money. In fact, my aunt (the CFA and Co-Founder of WIFE) says that we can make so much progress with financial planning and wellness just by realizing that we can and should talk about money proactively. Most people get stuck/shocked, don’t plan well enough, or have something unfortunate happen and then they say, “I wish I had taken care of all of this before.”

As much as possible, both partners in a relationship need to come to the table to discuss money with a positive attitude knowing that each has done that best as they could (and nothing wrong) as related to money. Drop any shame and blame. Focus first on big conversations around money and what it means to us…what is it all for Then use your time for communication and connection to continue the above steps to be educated, organized, and putting things in the right order for success.

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This post originally appeared at https://makeeverythingfun.com/focus-on-financial-wellness-in-the-new-year/.