Fighting for Financial Balance
Understanding our Money
Getting our head wrapped around the status of our finances can be a really frustrating, confusing and embarrassing experience. Most of us have never been formally educated in how to make a coherent financial plan, and are frankly unsure if we're in a good place financially or if we're messing things up royally. Our financial habits are often based on negative examples found in our families (don't go bankrupt like so-and-so) or news feeds (Note to self: don't invest all your money in Beanie Babies) or some kind of positive mantras based found on Pinterest ("Always pay yourself first") that, if we're honest, we don't really understand.
Put us in a foreign culture and we really start to lose our bearings. What is normal? How much do I need to save? I'm rich here, but am I poor in my home culture? Am I making any progress financially or am I just treading water? Or, worse yet, am I frog in the pot, slowly getting boiled financially, and one day I'll realize it's too late and I'm never going to retire.
Now, for some of you, you have had the privilege of having life-long financial planners, financial literacy training, trust funds, or maybe you've worked your tail off and have more money then you're quite sure what to do with. If that's you, congrats, but this article isn't for you.
For a lot of us, we ignore the topic and hope that whatever retirement accounts we're paying into at our workplace is going to be enough for us to someday retire. If we're slightly more proactive, from time to time we might pray that social security is still around by the time we retire. If we're overseas, we are probably extra confused, because the retirement contributions may differ wildly from country to country.
Let's face the tough reality though. The world of working for GE or GM for 35 years and retiring to a Cadillac health insurance policy and healthy monthly deposits into our bank accounts isn't going to be a reality for most of us ever experience. Moving from job to job throughout your career is the new normal. Moving from country to country is "normal" for a lot of expats. And that means we're responsible for making sure we're preparing for the future. But the first step in being prepared for the future means we need to figure out where we are in the present. Today. And that can be really scary.
The idea of taking a big picture look at our financial situation can be pretty awful. Why would we do this to ourselves? We're trying to make it through life as best we can, and the idea of doing a comprehensive financial review sounds overwhelming and painful. So we avoid it. We know things aren't quite right and ends aren't quite meeting, but we somehow make it to another paycheck which gives us some breathing room for a few more days. We're surviving, but we're not sure we're making any progress. We feel like we're failing already, so why would we put ourselves through the agony of looking at the full glory of our financial ineptitude? It exposes so many of the fears and insecurities we have in this arena. So we avoid it for a little longer. And we hope that it works out somehow. But in our gut, we know that we really don't know what's going on.
Please don't do this to yourself.
But why do this now? Because the longer we wait, the fewer options we have. And because, whether we realize it or not, we are either descending into a worse position financially, or we are missing opportunities by not maximizing our financial position. Financial balance is a long game. There is a very real cost of inaction financially, and that price isn't borne by us alone. Our spouses, kids, extended families and society generally pay the cost of our inaction. And we pay the cost personally. You may not feel it today, or tomorrow, but over and over again I run into examples of people who feel that they don't have options, they missed their chance to make changes in their lives, and now they don't have the ability to make those changes. They are stuck in jobs that they don’t feel safe in, disappointed that they can't provide for their kids in the way that they want, or unable to seize opportunities due to a lack of resources. That's why now is important to resolve today. It's a process to achieve financial balance, and it won't' be accomplished in a day, but it is important to start that process. The longer you put things off, the more insurmountable that obstacle will become.
So what do we do? Well, the first steps of making any change is to figure out where exactly you are, and where you want to be.
So here's a place to start:
1. Honesty and Courage about our Finances
The longer we avoid the issue, the more overwhelming and terrifying it becomes in our mind. We need to commit to engage the situation, and be willing to honestly consider what we learn. Our past choices have affected our current situation, and our current choices will dictate our future situation. We cannot undo our past, and we cannot avoid the future, but we do get to have a pretty big say about the present. The worst thing we can do is avoid looking at our finances and live with the constant stress of knowing that any day a unforeseen medial bill, a repair bill or a change in our job status could derail our lives. We need to be willing to take that long hard look at our financial situation, and then take the appropriate action. This can be a scary exercise. My friends have wept as they look at their situation, filled with shame. Others have blamed their spouse, or blamed circumstances. Some (very few) have been pleasantly surprised. But the first step if financial balance is the courage to look at where you are today.
2. Start keeping track of your money
Keep track of it all. Every dollar, ringgit, pound or euro. Just write it down, type it in, scan it in or whatever method you'll keep up with for a month. For me it was writing it down daily on a clip board, and then typing it into excel with a category that was easily sorted into major categories. The goal here is not to judge, but to just get a good sense of what "normal" is for you, and then go from there. Be careful though, once you start to notice where your money is going, it can become obsessive. But take a month, and do your best to track it all. After a month, you can start to make changes, but this will serve as a baseline for your normal. You might be suprised at all the small trickles of unintentional spending, and how a small decisions can result in significant spending over time.
But just keep track. And start to notice what you spend on. And that's enough for now.