Tag Archives: budgeting

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The 6 Stages to Successfully Changing Your Financial Behavior

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Have you noticed how some salespeople are relentless in trying to overcome your objections to buying? Most of them are taught that the more objections you have the more interested you are in whatever they are selling. I know how this “dance” works because I have taught and coached hundreds of sales professionals over the years. It wasn’t until I read S.P.I.N. Selling
by Neil Rackham about 15 years ago that I understood that to be a successful salesperson/Financial Advisor you have to understand the psychology of the buying/decision making process. Rackam uncovered the truth about buyers responding better to their salesperson/advisor when they asked questions that uncovered problems.

Uncovering problems leads the buyer to acknowledge that there is a problem in the first place that needs to be addressed (one they may not believe exists). Even after addressing all of your objections you still might have resistance to moving forward and changing your “buying” behavior or in this case your “financial” behavior.

A Financial Advisor can sit with you and address all of your concerns but you still might walk away dissatisfied. Why? The answer is because you haven’t necessarily come to terms with the fact that there is a problem. You haven’t worked through the natural process to overcome your resistance to making changes because from where you sit you aren’t convinced yet that there is a problem.

In the book Facilitating Financial Health the authors Rick Kahler and Dr. Brad Koontz makes the point that there are six stages associated with overcoming our resistance to change. They sound a little clinical but see if you see yourself in any of these stages.

  1. Pre-Contemplation – This is where people don’t realize that they have a problem. For example it could be overspending or a lack of understanding as to how much money it will take to retire at a reasonable age. You have heard the term, ignorance is bliss”. That fits into this stage.
  2. Contemplation – This is where you finally realize that you have a financial problem and you are at least considering making a change within the next year. You might still feel ambivalent about that change but at least you have broken through the barrier to understanding the need for change.
  3. Preparation – Here your time frame for action has shortened to 1-3 months. You know that you need to take action and you are ready to start putting a plan together. You are willing to put that budget together and make changes to your spending and saving habits.
  4. Action – Now you are ready to implement those plans that you started in stage 3. You work with your financial planner to execute on your plan. You may still have some concerns that need to be addressed but you are ready to work on overcoming them compared to where you were in Stages 1 and 2.
  5. Maintenance – The changes you have made are now part of your life style. Congratulations! Sure you will have some setbacks and relapses but your mind is ready to accept the changes as a beneficial part of your life now. Here you can automate many of your financial transactions such as contributing to your 401(k), paying bills, etc. which will minimize those relapses.
  6. Termination – In this stage you have made permanent changes with little chance of reverting to old bad financial behavior. You and your planner meet periodically to monitor your plan and make asset allocation adjustments. You have a true partnership with your planner. You may even refer your planner to your friends and family as a result of your satisfaction with the partnership that you have developed.

So what can we learn from this discussion of resistance? First, resistance is a normal part of the behavior change process. Second, if you try to shortcut the stages you probably won’t be successful in overcoming the resistance. In fact if you don’t have some objections to overcome when you meet with a financial advisor it probably means you are not connecting with him/her at an emotional level. The days of having a financial advisor pat you on the knee and say, “there, there, I will take care of everything” are over just as they are in the medical profession.

The most successful financial advisor/client relationships from my experience are true “partnerships”. You need to connect with your advisor so I recommend that you not settle for anything less. It’s normal to resist changes to your financial behavior. Don’t beat yourself up. Give yourself time to work through these stages. When you are ready then find an advisor you can truly partner with; someone who understands that it will take time to get you on track to a successful financial journey. Plan well. Live better.

Click here if you want to explore my financial coaching service. I also offer free 30 minute Clarity Session as well.


Time Out!
What stage of overcoming resistance to changes in your financial life are you in? You can leave a comment here.

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Budgeting Smudgeting, Why Do I Need a Budget?

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I know, I know. Just the thought of having to put a budget together reminds a lot of people of going to the dentist when they haven’t been for a few years. It’s that fear of, “What am I going to find out? And, “Whatever it is, it’s going to be painful.” Before you run off to another blog site let’s try to come to terms with both the fear of budgeting and the reasons why you absolutely have to go through this process. And…it might actually be fun! Yes, I really did use the word fun in the same paragraph as “dentist” and “budgeting”. Hear me out on this.

Why is budgeting so painful?

I believe it’s because many of us know we have “leaky” behavior so it’s a matter of “the truth hurts”. Leaky behavior is what I call those expenses that may not seem like a big deal but over time they add up to thousands of dollars. Money that could help you reach your retirement savings goal; things like daily Starbuck’s coffee runs, eating out every weekend, weekly shoe shines, having a yard guy (or gal). You get the idea. At the risk of being called the “fun police” let me state that you don’t have to automatically cut out all of those enjoyable expenses but when it comes to finding extra dollars to invest for your retirement those are areas we want to look at first. That’s why it’s important to know what they are in the first place. And that is where the pain comes into play. Many people upon learning of the amount they spend on these various behaviors often bring their hand to their forehead and cringe. There’s the pain. We are often resolved to our income and know it well but we “hope” there is enough money at the end of the month instead of vice versa.

How Can a Budget Help?

First, you start form a position of strength. You take control of the monthly expenses instead of the expenses taking control of you. In other words you have a game plan. Imagine if your favorite sports team started the game with no real plan, just a vague idea of how they hoped the game would go. They know they want to score more point than the other team and they have a pretty good feel for how they have done it in the past so off they go. What do you think the chances of victory would be? Well, that’s how many people treat their personal finances. They hope their income will cover their expenses. Your budget is the foundation of your game plan.

How Does the Budgeting Process Work?

It begins with gathering the data that makes up your financial history. Next, you use this information to do a cash flow analysis. That’s taking a look at your income versus your outgo. You will calculate what’s called your net cash flow. That will tell you whether cash is coming in faster than it’s going out…or vice versa. Then we need to know your net worth. In simple terms, your net worth is the sum of everything you currently own minus the sum of everything you currently owe. Why is this important? It gives us a snapshot of where you are today…financially. This is the foundation of our game plan. It tells us form where we are starting. Just like a team at the beginning of the season. They need to know what they have to work with and go from there.

Once we have the snapshot of you financial situation, then we start looking at your money goals including retirement, college funding, social security, healthcare just to name a few. Of course not all of these may be on your list of goals depending where you are in life…at least not yet. We have to set priorities and timelines.

Budgeting is not a one-time deal or a once a year deal like paying taxes. Yes, we have to revisit that bad boy on a regular basis. So like anything else that can be a chore to do we have to make it as enjoyable as possible. Thanks to technology even budgeting can be fun. Yes, I used that “fun” word again. Well, even if it isn’t fun it can become bearable.

Check out my Budgeting That Makes $ense course. Click here to Learn More and check it out!

Check out our Budget Tracker tool here. I know that you will find it helpful. You can also get a FREE copy of our Net Worth Calculator here.

Question: How do you feel about the idea of building a personal budget? You can leave a comment by clicking here

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Think Like an Athlete, Retire Like a Pro

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Like many of you I watched a little football this past weekend. As a former competitive athlete I have an appreciation for the mental part of the game. Not to take anything away from the athletic abilities of the players, if you strip that away or could somehow even-out the talent on both teams you would find that it’s the team and players with the mental edge that will usually win.

I have been an athlete most of my life and once I made the transition to the business world after playing college football I found myself relying on the same qualities in business that served me well as a competitive athlete. In many cases they gave me an edge over my coworkers and competitors. I also realized that these qualities were not limited to athletes. They could be learned. So what is “the mental edge”?

One of my classmates from Stanford, Mariah Burton Nelson, who was a terrific competitive athlete in her own right in college (basketball), wrote a compelling book titled, We Are All Athletes, where she explores how everyone can apply the athletic qualities of champion athletes to everyday life.

To clarify, when I discuss the “qualities” of a champion athlete I am referring to qualities like discipline, goal-oriented, humility, commitment, courage and having a plan. Let’s take a closer look at these qualities so you have a better understanding of how you too can “think like an athlete and retire like a pro”.

  1. Goal-oriented – Think for a minute about your favorite athlete or sports team. Do you think that at some point there was a goal or do you think that individual or team success “just happened”? I know from my own athletic experience I always had a goal. I wanted to be the best I could be in my sport. But I learned at an early age that wishing wasn’t going to get it done. I had coaches who helped prepare me and parents who encouraged me and a belief in myself that I could get there i.e. passion. I also had a belief in my ability.

    So how can you apply this to your retirement planning? Well, it all starts with goals; short-term goals (1-5 years) and long-term goals (5+ years). It involves you sitting down with a pad and pen (or iPad and stylus) and deciding on what your retirement will look like and how you will get there i.e. savings and investing goals, lifestyle and timeframe.

  2. Have a plan – One of my college coaches, the late Bill Walsh (yeah, he coached at Stanford before his 49er fame), used to script the first 20 plays of every game. Part of it was contingency planning so if things didn’t go as planned there was another play to call that would address the new situation. We have to do the same with our own financial planning. We can hope to get a 7% return on our investments but what if we don’t? That is Plan B. A football team can plan for a strong running game, but what if the team comes out passing? How will they defend the change in plan? We have to know what the goal is and the plan will make sure we get there, maybe with a few detours but we will get there.
  3. Humility – Hey, life happens, right? That’s what Plan B is about. Frankly this is a quality many athletes struggle with, how to be humble. What was that old poster from years back, “It’s hard to be humble when you’re as great as I am”? I’m sure we all know a few people who embody that saying. Humility and our financial lives do go hand in hand though. To me, humility means having respect for wherever we are in life and that applies to your financial life. So if you are not where you want to be financially, respect that and make a commitment to “put a stake in the ground” and say, this is where I start, today”.
  4. Courage – It takes courage to be a champion athlete and it takes courage to execute a successful financial plan. Just like an athlete you make sacrifices and tough decisions for the good of your financial plan because you believe that your plan will take you to the “Super Bowl” of retirement whatever you perceive it to be. You own it.
  5. Discipline – The most disciplined athletes are the most successful. Your discipline will be a reflection of how committed you are to realizing your financial goals. I put discipline and courage together. You can’t have one without the other. Discipline takes sacrifice. Your financial success will be a direct result of the disciplines you embrace. No it won’t be easy. Things worth having rarely are.
  6. Commitment – Do you “walk your talk”? This is where games are won and lost and financial fortunes are made and lost. I’m not referring to staying with an investment or a plan that just isn’t working. Coaches change up game plans at halftime to respond to things that are working or not working. Commit to the right activities and behaviors. Change your plan as necessary and don’t do it alone.
  7. Teamwork – Just as championship athletes rely on their team for their individual success we have to rely on our financial professional to help us develop and execute our financial game plan. This is no time for going it alone. The “stadiums” of financial planning are littered with retirees who went broke trying to do it themselves. Work with someone that you trust. Do it as a team!

You don’t have to be an athlete or even follow sports to embrace the qualities that go into a championship athlete and team. You are an athlete when it comes to building your financial success. Think like an athlete, retire like a pro!

Time Out! Which quality do you struggle with when it comes to executing a successful retirement income game plan? You can leave a comment here.

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Have 30% of Boomers Given Up On Retiring? 5 Reasons to Have Hope.

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I read an article in USA Today that appeared on March 18th. The headline screamed, “A third have less than $1,000 put away”. My immediate thought was that these are boomers who have given up on the idea of retiring any time soon if at all. My second thought was that these people just don’t understand the whole retirement income picture.

I can’t help with the first group but the second group is right up my alley. The force that will drive boomers to retirement success is education – learning some basic information about how to plan for a successful retirement. Forget owning the vineyard. I’m talking about not outliving your money!

The USA Today article goes on to explain that 60% of workers have less than $25,000 saved for retirement. Only 44% of those surveyed say they have tried to calculate how much money they will need to save by the time they retire. The survey concluded that those who have done the “calculations” tend to have higher level of savings. If you have been following my blog you know what calculations they are talking about. If you don’t, go here to learn more.

The biggest reason cited for not saving enough was cost of living and day-to-day expenses. Another telling statistic from the survey is that many people surveyed do not have a retirement plan such as a 401k or IRA that they can contribute to.

There are a couple of conclusions one could draw from the survey results:

  1. Many people have just given up on the idea that they can stop working someday and “retire”.
  2. People think that Social Security and/or an inheritance will appear and solve their retirement savings problem.

Both of these conclusions are dangerous so let’s focus on what people can do today, right now, to start bridging the gap between those who are confident they can retire and those who feel there is no hope of ever being able to stop working.

So what can you do if you find yourself with little or no money saved for retirement and you are 40+ years of age? Here is my list of things you can and must do right now:

  1. Sit down with a Financial Advisor and figure out exactly where you are. How much have you saved, what is your income and current expenses? Don’t try this alone.
  2. Put a budget together. A good financial planner will be able to help you find a few dollars to invest toward your retirement regardless of how strapped you think you are. Get more info on budgeting here.
  3. Find out what your “retirement gap” is. That is the difference between what you need to retire at a point in the future and where you are headed now. I call it your “Red Line” – that point where you will run out of money in retirement unless you make some changes now.
  4. Discuss the “Red Line” solutions with your advisor. For a more in-depth review of these “Red Line Solutions” review my blog post here.
  5. Decide on your plan of action to bridge the Retirement Gap. It’s never easy but the good news is that there is hope.

To review the USA Today article and survey results from the Employee Benefit Research Institute and Greenwald and Associates click here. My regular readers have heard me say this many times before but it’s a drum I will keep beating, “The best time to plant a tree was 20 years ago. The next best time is today.” And so it is with your retirement income planning. You can’t go back and start over. So let’s get started right now!

Time Out! What is your biggest concern about retirement? You can leave a comment here.

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#1 Fear is Running Out of Money in Retirement – Having Fun is More Important

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When does the fear of going broke outweigh the pain of saving for retirement? The answer remains a mystery if you read the latest report from Bank of America Merrill Edge. They surveyed people with incomes from $50,000 to $200,000 and the feelings expressed were similar regardless of income.

Some of the more surprising results showed that while the number one fear for more than half of the respondents was “running out of money in retirement” over a third of those who feared running out of money said that still they are not willing to cut back on entertainment to save more (eating out and vacations included). 63% said that having money to live “in the here and now” is a priority.

If you feel guilty that if you won the lottery you might blow it on a trip to Vegas or a new car or some other toy don’t worry because 34% said they would not use their lottery winnings for retirement. Some good news is that 89% of those surveyed stated they have a household budget but…66% say they are consistently unable to live within that budget.

So getting back to my initial question, when does the fear of going broke outweigh the pain of saving for retirement? Stay tuned because there is no clear cut answer. The jury is still out. It still appears that many people have given up on the idea of retirement and will either work until they drop dead or move in with the kids if they run out of money.

There is always some good news from the confusion of these surveys. It can be different for you. If…you start right now. It takes a plan and is what most of these survey respondents do not have. Like you they may not be aware of the Red Line Solutions that may help you enjoy retirement on your terms. What are they? If you follow my blog here is a reminder. If you are new then have hope and take action:

1. Work longer, retire at a later date. Don’t forget, each year that you continue to work increases not only your Social Security benefit, if you have a pension it could increase that benefit as well. It will also allow your retirement investments to continue to grow (401(k), IRA accounts, and taxable investments).

2. Work a second job or part-time after retirement. The first step is to figure out what your income shortfall will be and then you can start considering the type of part-time work you will need to supplement your other sources of income in retirement.

3. Reduce monthly expenses. Yes, this can be a painful process but in many cases it will be necessary. This is why the budgeting step is so crucial. You don’t know what needs to be reduced if you don’t know what you are spending. Check out my Budget Tracker tool to get started. Most retirees don’t need to live on their pre-retirement standard of living. It will probably be somewhere between 70-80% of what you are spending now. Once you have your budget you can figure out what can be reduced or eliminated.

4. Increase the contributions to retirement accounts. Use the power of compounding and time to work in you favor. Even a small increase of $50 to $100 a month can have a dramatic effect on your retirement savings depending on how long you have until retirement.

5. Sell an asset. Again, probably a tough decision. Maybe not, if that vacation home is going unused now that the kids have grown and are not as interested in using it as they were once upon a time. Or maybe you want to downsize and get a smaller, less expensive home or move to a part of the country that is less expensive than where you live now.

Take action and have a plan. Don’t let survey results justify bad financial decisions or discourage you. Your situation is unique and you can retire on your terms. Please let me know how I can help you.

Time Out! What money concerns keep you awake at night? You can leave a comment here.