If you or someone you know is a money avoider, my goal isn't
to turn you or them into someone who loves dealing with money. That's not going
to happen. However, I can show you how work together to ensure that you can
accomplish common financial goals and won't suffer the ill affects that money
avoiders so often do in their neglect of their finances.
Coming to terms with money avoidance takes time and patience.
That statement isn't meant to provide you with a reason to forgo making changes
in your financial life. Instead, I'm relaying a fact, and reminding you that
change takes time and some steps forward interrupted by steps back.
The first and most important part in the process is to
recognize the tendency and some of the biggest causes. Many people find it
helpful to write down their feelings relating to money avoidance or to speak
about their feelings and history with money with someone who is an empathic
"I always felt stupid about math and wholly inadequate. I
can't even bring myself to use a calculator out of fear I won't even know how
to use that properly," says Heidi a forty-something year-old woman. It took
Heidi about two years to make some major changes in how she handled her
personal finances. She began to make progress when I was able to persuade her
that she didn't have to be a math whiz to make positive financial changes.
Heidi didn't have major spending problems, but she was sloppy and lazy about
saving money and investing it well.
I had her sign up for her employer's retirement savings plan
so that she could begin to save about 8 percent of her salary. We had the money
withdrawn from her salary and directed into a handful of well-diversified
mutual funds. "I can't believe how painless it is to do this, and there was
virtually no math involved. All I had to do was complete a one-page enrollment
form, which required me to say what funds and what percentage of my
contribution went into each fund that I selected," said Heidi.
With the meager
amounts she had been saving that were languishing in a low-interest bank
account, Heidi would've needed to work until her mid-seventies to achieve the
standard of living in retirement that she desired. Now, she's on track to be
able to stop working by her late fifties. Seeing these quantifiable changes in
her retirement age and gaining a basic understanding of the steps she needs to
take to reach her goals was a great motivating source to Heidi and has given
her savings a purpose. Equally, if not more important, she feels in control of
her life financially, and rid herself of that ever-constant anxiety
about not being on top of things.
In my work as a financial counselor, I found that many
avoiders typically felt greatly overwhelmed with a laundry list of financial to
dos. That's why you should prioritize and only work on the top one or two items
at a time. I'd tell clients that even though they might have a total of eight
or ten things on their longer task lists, they shouldn't expect to complete
those next week or even next month. It might take six months to a year to work
through the longer list. Here's how to get control of your money:
Pay your bills automatically. People who are financially
disorganized often are late paying bills. Late payments, particularly when it
comes to paying taxes, are a problem that can lead to substantial late fees,
interest, and penalties. Even if the fees and additional interest from
individual late payments - $5 here and $30 dollars there - don't seem all that
significant on their own, they can add up to a hefty total if you make paying
bills late a habit. One of the best things that a money avoider can do with
their bills is to set each of them up for automatic payment. Whether it's your
phone, utility, or monthly mortgage bill, you should be able to establish an
automatic payment plan that doesn't require you to initiate payment. With just
a little upfront work with each creditor or billing company - often not much
more effort than paying a monthly bill - you can rid yourself of unnecessary
fees and interest and save a little time each month. Many companies accept (and
actually prefer) payment through an electronic transfer from your bank account.
Some loan holders (such as the U.S. Department of Education) may even lessen
your interest rate slightly in return for what amounts to a guarantee of an
on-time payment every month. If not, you may be able to have the payment
charged on your credit card, but be careful with this route if you sometimes
don't pay that bill on time! (Another alternative is to use online bill paying
through your bank.) If, for whatever reason, you're unable or unwilling to put
your bills on an automatic payment system, you can put together an
accordion-style folder and organize your bills according to when during the
month they need to be paid. Please understand that I think that this system is
second-rate (in terms of efficiency and likelihood for success) compared with
an automatic payment system.
Develop a regular investment program. Just as Heidi did, all
money avoiders should make their investing automatic. If you work for an
employer, doing so is usually easy. Often, the most daunting part of the
process is wading through the wad of retirement plan and investment information
and brochures your benefit's department may dump upon you when you tell them
that you want to sign up for their payroll deduction savings program. Not only
will your money grow faster inside a tax-deferred account, but your employer
may also offer free matching money. The simplest way to navigate through the
morass of paperwork is to look first for the specific form you must complete to
sign up for the payroll investment program. Thoroughly read that form first so
that you know what you need to focus upon and get smarter about as you review
the other materials. If your earnings come from self-employment income, you'll
need to establish your own retirement account. Learn about the different
retirement account options and choose the one that best meets your needs. The
two self-employed retirement account options that enable you to sock away the
greatest amounts are SEP-IRAs and Keoghs. With each of these plans, a
self-employed person may contribute up to 20 percent of their business' net
income up to a maximum of $49,000 for tax years 2009 and 2010. These plans may
be established through the major mutual fund companies that I like such as
Vanguard, Fidelity, and T. Rowe Price. And, you can generally set up these
accounts so that a regular monthly amount is zapped electronically from your
local bank account into your mutual fund investment account. (Be careful not to
over fund your account which may happen if you overestimate your business
income prior to completing your tax return.)
Close insurance gaps. Nearly every money avoider I've met
over the years has problematic gaps in their insurance coverage. Solving this
problem presents some challenges because understanding various policies and the
coverage of each is complicated. Add on top of that the unfortunate fact that
to buy most insurance policies, you must deal with a commission-based insurance
agent. Talk about a recipe for headaches and conflicts of interest! But these
are not acceptable excuses for avoiding this issue because so much is at stake.
Hire financial help, carefully. Money avoiders are clearly a
group of people who could benefit from hiring a financial advisor. However,
they're also among the people most likely to make a poor choice when hiring.
It's difficult to evaluate or care enough to evaluate the financial expertise
(and potential conflicts of interest) of a financial advisor if you're
disinterested in, (or suffer anxiety about) and actively avoid money issues.
Your first step, if you're inclined to hire help, is to clearly define with
what it is that you desire assistance. Do you need assistance with analyzing
your budget and developing a plan to pay down consumer debt? If so, most
financial advisors aren't really trained for or interested in helping you with
that - there's far more money to be made selling investment and insurance
products to the affluent. Advisors are best suited for folks who want to
quantify how much they should be saving for specific goals and determining
where to invest it. However, there's no getting around it: You do have to do a
lot of digging to find a competent and ethical advisor who has reasonable fees.
With that information in hand, you can confidently and strategically evaluate
potential service providers who can help you overcome your inertia and get you
on track managing your money.
Copyright Eric Tyson, 2008 - 2017 all rights reserved.
Eric Tyson is the only best-selling personal finance author who has an extensive background as an hourly-based financial advisor and who does not accept speaking fees, endorsement deals or fees of any type from companies in the financial services industry or product or service providers recommended in his articles, books and his publications.