Financial management starts with education - whether through taking a formal class, reading a book, or talking to a financial professional - to realize what you have been capable of all along. Successful financial management is not about how smart you are or how much income you have. It's about the decisions you make every day. The best-kept secret is that there are several professionals out there - bankers, financial planners, tax preparers, brokers - who want to teach you what you need to succeed. There are also many places to learn: workshops, books, employer-sponsored brown-bag lunches, online education, and adult-education classes. You can learn on your lunch hour at work, on a Saturday afternoon, or on a weekday evening. You can learn with friends, with colleagues, or alone, either in front of your computer or curled up by the fireplace.
Why all these choices all of a sudden? The ongoing trend in our nation is toward increased personal responsibility, and these professionals know that for them to be successful, you have to be successful. They also know that education is the key to your success. Education offers a side benefit: We like what we are good at. Once you realize that you can do something, you will develop not only confidence, but also a sense of personal satisfaction. This combination will stimulate quite possibly another Eureka Moment: that the more you learn, the more you want to learn because - guess what? You are enjoying the process! Emily, 43, is single and has owned her own business selling women's accessories for over 21 years. "I feel that I can always learn more," says Emily who stays on the lookout for ways to gain knowledge from a variety of sources. She takes classes, attends workshops, listens to friends to find out what works for them, and reads a lot.
The tip she most often shares with others: "Write down your goals." She carries her written goals with her so that if she needs a reminder - or a reason not to be parted from her savings - they are right there to review. So far, in part due to this technique, she has managed to meet all of her goals.Her first goal was to pay off credit cards, and she did. Next she established a retirement account, and finally she achieved her most important goal - to buy her own home. As Emily met each goal, she became more interested in personal finance, so she is currently looking for a class on retirement planning. Emily is relieved and happy that she has taken charge of her financial future. Managing her finances has become an activity she has learned to enjoy. So can you.
If you are in a relationship, perhaps you are about to embark on a financial planning adventure with your partner. Maximizing the concepts discussed so far, finding your inner spark, and relishing a Eureka Moment, all involve learning and growing. Sharing this experience with your partner can lead to a deeper bond between you as you meet your goals together. One result of the demands of modern society is that most couples generally spend a great deal of time apart. Our work (even if one partner works in the home) takes us via different routes to challenges that can lead to divorce or to a state of isolation from one another. "We grew apart" is an all too common complaint.
Avoiding this unfortunate state of affairs takes patience and work. It involves taking advantage of opportunities that couples have to grow together, and nowhere can this be more rewarding than with financial management and planning. Since these activities involve setting and working toward goals, with couples, these goals are common and shared. Although you and your partner may have divergent philosophies, come from different backgrounds, and have your own sets of values, your ultimate goals are most often the same:
By working together, you can also build harmony. If striving toward individual personal fulfillment is valuable to you, then working toward a mutually rewarding and fulfilling life with your partner can only be better.
Steve and Maria are engaged and plan to be married soon. Steve, 26, is a chef from Cambridge, Massachusetts, and Maria, 25, a native of El Salvador, is a banquet server. They talk about their finances regularly and can discuss issues comfortably. "If we're going to spend anything over $50, we have promised to tell the other," Steve says. They plan to have a joint account for their combined expenses but will maintain separate accounts as well. His is a "fun account" to be used primarily for nights out and movie rentals. Hers is a "hair and nails" account. Although Maria wanted a festive wedding celebration, she wanted their own home more, so their wedding will be intimate and inexpensive. They are saving to buy a duplex to move into after their wedding, and plans call for rental income from the second duplex unit and more income properties after that. "It will be a good learning experience, and we have some good people behind us," Steve says referring to Maria's mother who also owns investment property. The couple has a shared vision of the future, and they are taking steps together to realize their vision. "A couple has to be on the same page,"Maria says. "They have to work together if they really want to get ahead."
Not every couple has the strong sense of shared values and goals as Steve and Maria, and when life philosophies and values are different, tensions can mount over money. Couples often fight instead of talk, derailing any sense of adventure they might otherwise enjoy from their personal finance activities.
What you value for yourself includes everything in your life that really matters to you, just as the values of those who share your life include all that really matters to them. Changing your focus from resistance to momentum, from reluctance to passion, involves taking that first step. It may feel like the stop-jerk-start you experienced when you learned to drive or your dizzying reluctance to jump off a diving board for the first time, but once you catch your breath, you will realize you have transformed your relationship as well as the way you both think about your financial future.
Okay, you may be on board, you have even taken courses and want to move ahead, yet procrastination might be your particular habit: "I'll do it later," or "I'll get to it tomorrow," or "After the holidays." If so, you are not alone. Researchers have been studying this disconnect between what people know they should do and what they actually do. It even has a name: "the knowing-doing gap." You might have all the training and knowledge you need to manage competently, but still you do not take the actions you know you should. Just what does it take?
It turns out that most people are reluctant to transform knowledge into action unless they have some compelling reason. Kyle, for one, admits that he was a poor money manager until he and his wife took a homebuying course together. They enjoyed the class since it was something they could do as a team.Neither one was knowledgeable about financial matters, so they helped each other understand the concepts presented in class.Armed with new knowledge, they bought their home soon after and picked a mortgage with great terms thanks to the good advice they received. Kyle now says there is deep satisfaction in doing something he did not think he could do, and he and his wife are signing up for a new class on Investing.
Researchers speak of momentum as an "inner spark." What might it take to get you to give up a night on the town to sit in the basement of your local YMCA and learn about budgeting, saving, home buying, or investing and then go home and put those lessons into practice? Your inner spark is a unique and personal experience - in Kyle's case it was a home of his own and the discovery he made that team learning and financial management with his wife were deeply satisfying. Although we cannot predict what will trigger your inner spark - a new baby, getting accepted to the school of your choice, going for your dream job, obtaining credit for the first time, or buying a new home, we can suggest how to proceed once you feel it. Like the executive managers who succeed at turning knowledge into action, you too must develop a plan and follow it. You must analyze your spending, budget for the future, save and plan for your well-being, and inspire yourself to learn continuously, transforming that knowledge into daily action. According to authors Pfeffer and Sutton, executive managers that act on their knowledge also eliminate fear, abolish destructive internal conflict, and act in accordance with values that really matter to the firm. This can happen for individuals and families too.
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