Why do so many people feel they’re not on track to living the life they desire?  It’s because they go through life reacting to daily emergencies instead of proactively creating the life they desire.  You must admit that you’re so busy with today’s commitments–work, family and other obligations–that you rarely have time to plan for tomorrow.

Most people make their financial decisions in a similar fashion.  People commonly buy stocks on a whim after a “hot tip” or invest their 401k assets in the “aggressive” fund because another coworker suggested it was best.  Or they’re sold a life insurance policy as an investment instead of for its intended purpose of replacing income after premature death.  Another reaction is wondering what your tax return will be instead of proactively planning to save taxes.

According to the bestselling author Brian Tracy, only 3% of the population writes down their goals.  According to research, that small group is one-thousand times more likely to achieve their goals than the remaining 97% of the population.  Think about that number; a one thousand percent greater chance of getting what you want out of life.  That is an amazing statistic.

So why does writing your goals increases the odds of success? It’s because in order to write them down, they must be crystal clear in your head.  Once you’re clear where you’re going, then you can focus all of your energy into achieving your goals.  With crystal clear focus you will no longer react to life’s little emergencies–you’ll simply continue to follow your plan.

Although writing your goals is important, it’s not the point of this article.  In this article I’m suggesting that before you make another financial decision, become clear about what you really want out of life.  Then make sure every investment or major purchase contributes to that lifestyle.  Decide today that you will no longer wander through life reacting and instead become focused on achieving the life you want.

Your Best Interests PSA

This is very powerful, but it’s often overlooked because it’s so simple. Most people save whatever is leftover each month but this never works. Rarely is there anything left to save after paying the bills. It’s human nature to spend whatever is in the bank, which is why you have to pay yourself before anyone else.

If you automatically save from each paycheck, you will be amazed that you still have enough left to pay your bills. We subconsciously adjust our spending to whatever is in the bank. Do you remember your last raise? At first you had a little extra money until you got used to it and then money was tight just like before the raise. The opposite is also true. If you start paying yourself first, you will feel a slight pinch in the beginning, but you will adjust your spending without even noticing it.

It works best if it’s automatically deducted from your paycheck. Begin with a small amount and have it deducted from your paycheck just like your taxes are withheld. If your employer can’t do this, have it automatically deducted from your checking account on payday.

Right now it’s not important how much is withdrawn. It can be as little as $25 every two weeks and it doesn’t matter where the money is deposited. You just need to automatically and consistently transfer the money into a separate account. Later you can worry about where to invest the money but for now you’re just creating a new habit.

He jokingly replied “if you look at all of my finances, you will see how messed up I am.” He said this in jest, but this is a realistic concern for most people. Not only are people afraid to expose their mistakes to a financial planner, they’re also afraid to discover those mistakes for themselves. Most people have this same apprehension when visiting a financial planner for the first time. This fear can be so powerful that it may prevent someone from seeking the advice they need from a financial planner.

If you have ever felt this apprehension, please consider the following points. Those who become fee-only financial planners, enter the profession because of their passion to help people. When you consider the amount of time and energy necessary to become a good fee-only financial planner, there are far more profitable professions. All ACA Advisors have a college education and many have advanced degrees. They have completed hours of specific financial planning training and continually update these skills. These planners go through this because of their passion to help clients.
When good planners meet with clients, they do not judge them. Planners listen intently to the client’s situation to find ways to make the client’s life better. Your financial planner has many other clients who are in similar situations as you. Not only have they already seen all sorts of situations with their clients, they may have made the same mistakes themselves. Remember that financial planners are human and may have already been in a similar situation.

Many planners also employ financial advisors for their finances. It’s not because they lack the knowledge to manage their own investments, but many agree that it’s incredibly helpful to have an objective perspective when dealing with money. Many advisors entered the profession after going through the financial planning process with another advisor. They discovered the value of financial planning and want to share their discovery with others.

We are continually evaluated for our performance in life. It begins with letter grades in school, continues with performance evaluations at work and then all of the other times we are critiqued in life. As difficult as it is, we cannot take this baggage into the financial planning meeting. When you meet with your advisor, it is not your performance that will be evaluated. Your advisor does not expect you to have all the answers or to have made perfect decisions. We are always learning and cannot possibly have been born with the knowledge to make perfect decisions.

Your financial adviser understands that life is not as perfect as in a textbook. Each of your financial decisions was made under less than ideal circumstances and was most likely the best decision at the time given the information you had. When you made your choices, you did not have the luxury of hindsight.

If fear has ever prevented you from enjoying the valuable benefits of holistic financial planning, understand that most people have the same apprehension. Your financial planner is there to help you move forward and will not judge your past. If you have made it this far, you have not made any devastating choices, but you may benefit from some direction and coaching and make even better choices in the future.

The truth is, when your taxes are prepared, you are merely documenting the past. There is not much that can be done to save money, when compared to early tax planning. With tax planning there is so much more you can do to dramatically reduce your tax bill.

I agree it’s exciting to get a big, unexpected tax refund, but what do you normally spend it on? It’s human nature to spend unexpected sums of money. If you have not mentally accounted for the money, it’s easier to view it as a surplus and spend it frivolously. Do you remember what you spent last year’s refund on? Was it something you’re still glad you bought?

Many argue this works as a forced savings account and enjoy the large refund. While I understand, I disagree this is the best way to save money. I’ve found that most frustration over money comes when you don’t feel in control of it. It’s common to believe that your employer, credit cards or the IRS are in control of your money. This out of control feeling is what causes stress and arguments over money.

By planning your taxes, you will begin to take control of your finances which is very comforting. You will never again dread tax season because there will be fewer surprises. By going through the tax planning process you will gain better awareness of where your money is going and then be able to direct it toward what’s most important to you.