Many people, uncertain how to decide among so many financial choices, need advice to help them improve their decision making. But often, people who have managed to save and think seriously about their life and future may need a financial counselor more than a financial adviser.
The distinction between the two may be indecipherable at a high level. But Bill Burnett and Dale Evans, in their book “Designing Your Life,” provide a helpful explanation that translates well to personal finances. As they suggest, counseling is when someone is trying to help you figure out what you think. Advice is when someone tells you what he or she thinks.
No matter the stage of life — early career, closing in on retirement or redefining your life as a retiree — many people struggle to figure out what they think about their money and how to best put it to use to support long-term financial freedom and ongoing lifestyle choices.
“You can never be too clear on your own thinking” Burnett and Evans write, based on their teachings in the Stanford master’s degree program. “You can never get too good a grasp on your own best wisdom and insights. Finding someone who can give you good counsel and who regularly leaves you in a clearer and more settled state of mind is a great asset.”
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This is the highest and best reason for the existence of financial professionals. There are many financial “advisers” with varying levels of experience and qualifications, but there are fewer financial counselors who spend as much time getting to know you and your relationship with money as they do recommending any specific investment or other financial tactic. Finding the right fit for the softer side of personal finances can be as valuable as tax, insurance or investment strategies.
As George Kinder wrote in his book “Seven Stages of Money Maturity,” mistakes in managing money don’t come from picking the wrong investments, but because we fail to understand our own volatile relationship with risk. We need to resolve inner conflicts about money and the emotion that is attached to it to develop peace with money.
Before trying to figure out how to allocate your 401(k) or whether you should be buying or selling stocks at any given time, it’s important to understand your strengths and weaknesses about finances. You can then either commit to self-improvement or build a relationship with a trusted resource who can provide counsel as a foundation and then advice on specific actions to take.
SUCCESS AND STRESS
If you don’t gain clarity on your own understanding of money and its role in your life, you’re likely to spend your time working for someone else’s definition of success, perhaps not aligned with what you want and value. This can cause unnecessary stress. The American Psychological Association identifies money as a significant source of stress for 75 percent of people.
Stress can cause us to either avoid addressing issues, or to make impulsive, uninformed decisions. When stress is the basis of your relationship with money, it can be destructive to long-term financial security, create opportunity costs and emotional complications that interrupt your path to financial freedom.
This isn’t something that the affluent are immune to. Many people who have been diligent savers over time, or simply got lucky to acquire meaningful assets, still are uncertain about how best to use their money or what the money means to them. It’s also not an issue that only applies to women. Men are, in many cases, more susceptible to the fear and greed emotional cycle at the core of financial decisions.
Financial planning is imprecise and very much an ongoing exercise, but the process of planning can provide a foundation to make better decisions going forward. Sometimes, the counseling component of a financial plan is brief and the move into actionable advice comes swiftly. Other times, it can require reflection and deep thought to determine how you can become comfortable with financial decisions.
If finances were all binary — yes, no — decisions, implementing investment tactics, tax planning, estate management, charitable giving and so on would be easy. But there is enough squishy territory that you need to be settled on who you are so that you can feel comfortable with a wide range of potential financial outcomes, some that could be difficult to accept, others that could be successful beyond what you imagine.
Either way, you need to make choices and move forward without regretting the other choices that were available. This will help you achieve financial health and can lead to more satisfaction with work, retirement and the many ways you can choose to spend or invest your money.
Gary Brooks is a certified financial planner and the president of BHJ Wealth Advisors, a registered investment adviser in Gig Harbor. Reach him at firstname.lastname@example.org.