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How to Assess and Improve Your Level of Financial Health

When I first started working as a financial coach, many people would mistake me for a financial advisor or financial planner.  They thought I was someone who would help them learn how to invest their money for retirement.

And while financial advisors and financial planners are dear colleagues of mine and are very talented professionals, my work is very clearly in a different space where I’m helping people with their budgeting and money management skills so that they can focus on getting out of debt and saving money with the hope of building a financial plan to support their goals.

So in order to help people better understand what I did (and what I didn’t do), I created what I like to call “The Financial Health Spectrum™” which includes the 3 phases of Build, Protect, and Grow your financial assets.  These 3 phases simply reflect different levels of financial health, and while none of the phases are “bad” there is an increasing level of financial health as you move from the “Build” phase through to the “Grow” phase.  In helping people to understand what type of financial support they need, I encourage people to take a few minutes to assess where they fall on this spectrum so that they can properly identify which financial expert can help them with their goals and with improving their level of financial health.

In order to help you determine where you might fall on the Financial Health Spectrum™, let me explain each phase a bit further along with the respective professionals that you might want to connect with:

1)    Build phaseThis phase is typically where the 70% of people living paycheck to paycheck who are feeling out of control when it comes to their finances will land.  When building your financial assets, you’ll be looking to do such things as establish a budget (or what I like to call a “savings and spending plan” because budget is such a restrictive word), develop more proactive money management skills, get out of debt, and save more money.  To me, this phase is about improving your financial stability and strengthening and repairing your financial foundation so that in the future you can grow your financial assets. In this phase, you might look to work with someone who can help you increase your income, decrease your expenses, or perhaps do both!  This is the phase where I work with my clients, and some other colleagues who can help you in this phase include CPAs, money mindset coaches (to help you understand if you have money beliefs that are holding you back in some way), and salary negotiation coaches (so that you can maximize your earnings).

2)    Protect phaseThis phase is generally exemplified by wanting to either insure assets (property and casualty insurance, life insurance, health insurance, disability insurance, or long-term care insurance) or planning to have your wishes known about what to do with your assets in case anything happens to you.  Experts in this phase include licensed insurance professionals who can help you determine the right type and amount of insurance that you need and estate planning attorneys who can help you with drafting all necessary legal documents such as wills, trusts, family planning/guardianship paperwork, health care directives and proxies, and also Medicare/Medicaid paperwork.

3)    Grow phaseAt the end of the spectrum, once you’ve strengthened your financial foundation and protected the financial assets that you do have, you’ll also want to think about putting your money to work for you and growing it through investments and other financial vehicles (i.e. annuities, etc.).  The financial professional you’ll want to consider in this phase is a financial advisor or financial planner who will take the time to understand your future financial objectives and design a plan customized just for you to grow your money over time to achieve your goals.

As mentioned before, there is no “right” or “wrong” phase to be in, these phases are simply an opportunity for you to recognize where you’re at right now and determine the next steps that you’d like to take for yourselves to improve your financial health.  I also encourage people to think about moving along the spectrum as a longer-term process since strengthening your financial foundation and building financial independence is often a multi-faceted journey that takes place over time and with attention to progress (and not perfection).  It is also important to note that you may be in more than one phase at the same time (i.e. saving for retirement while looking to more proactively manage your monthly cash flow and put the proper legal paperwork in place).

So if you’re ready to get more information on how you can assess your financial health, make sure to stay tuned for more details coming soon on “The Financial Health Telesummit” coming in January 2014.  It’s a free event that you can attend from the comfort of your home phone, computer, or your favorite listening device (iPod, iPhone, etc.) with some of my favorite colleagues and financial experts who will help you to decide on the next steps to take in improving your financial health!

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Getting Out of Your Own Way to Step Toward Financial Freedom

Over the course of the last few months, I’ve had the occasion to talk to lots of people about what it is exactly that keeps them from wanting to talk about their money, and in particular what it is that holds them back from stepping forward to once and for all learn how to proactively manage their money.

What I found out didn’t necessarily surprise me since I’ve been clear for a while now on what gets in the way of people choosing to financially empower themselves, however I was once again surprised by how what I shared with people seemed surprising to them.  It was as if a light bulb went off in their head!

Here are the top 3 challenges that I find people struggle with when it comes to even raising their hands to ask for help when it comes to their money:

1)     “I’m the only one who doesn’t understand money” – If I had a bullhorn and could walk around everyday life this is the #1 money misunderstanding that I would talk about so that people would understand that they are NOT the only ones who didn’t get the “money memo”!! (Alas, with someone as opinionated and vocal as I am it’s probably best not to give me a bullhorn!)  The statistics are staggering – approximately 70% of people live paycheck to paycheck, which means they likely don’t have any savings and they may be managing large amounts of debt as well.  Also, a new statistic I heard the other day said that a recent survey indicated 76% of people feel out of control when it comes to their finances (LearnVest, 2011).  So in essence, about ¾ of people are not at all comfortable or in control when it comes to using their money to their best advantage.  Does that still make you feel alone about not understanding money? I hope it helps you to understand that if you don’t understand money that you are actually in the majority.

2)     “I’m embarrassed/ashamed/guilty that I don’t understand more about my money than I do” – This is a subset of #1 above, and has people feeling that they should know more about money management.  But here’s what I have to say to that – if you were never taught how to manage your money in the first place, why should you know how to do it? It’s not taught in our schools, and overall it’s a systemic issue that most adults don’t know how to manage money.  I didn’t learn until I went to college that how I grew up (with parents who taught me how to manage money) wasn’t the norm (and in fact it was anything but the norm).  I tell people just to let themselves off the hook…if they never learned how to manage money in the first place, simply acknowledge that and ask for help to learn how to be intentional and proactive with your cash flow.  End the guilt and shame today and move forward, making sure to be compassionate with yourself about your financial past.

3)     “Managing my money will be too hard/will take too much time” – My typical client tends to be a real go-getter who is focused on their careers and their families and living an active lifestyle.  While that’s great (and I live actively as well), that means they have limited time to manage their money so they need a quick system that is effective and is streamlined to be used in their rapid-paced life.  What I find sad about this is that people tend to say “I make good money, so at the end of the day while I could be doing better I’m doing ok and it’s not too bad – managing money is hard and takes a lot of time.”  It’s not too bad?  Is that what we’ve come to accept in our lives…that it’s ok just for things to be “not too bad”?  How about we start thinking about each aspect of our lives and reevaluating just how awesome we can have things be?  With respect to your finances, after an initial investment of time to understand where you are and where you want to go, you can easily set up streamlined systems to joyfully use money on things that matter to you while saving money and getting out of debt.  I promise, it does not need to be hard and it can be simple and efficient (and yes, even fun!) if you’re willing to do the initial work to put together a solid financial plan and then actually work that same plan.

So while I’ve been known to help deflate the seriousness and stress that is typically associated with money and finance, I do take my work very seriously when it comes to helping people remove the roadblocks to financial freedom and financial independence.  I can help you when/if we have a chance to interact, however I don’t always get to meet everyone in person (or by phone), so how will you help yourself to get out of your own way and move toward a financially empowered future today?

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