My wife thinks I’m crazy, because I can draw parallels between two completely different things.
I am of the option that behavior in one area of life recreates it self in other areas … hence my comparison with doing the dishes and dealing with planning in financial matters.
After more than 15 years in the financial industry on thing I see time and time again is people only change when they are forced to. Since change is never easy, we avoid it. What we don’t often realize is the change we make today is almost always easier than the change we have to make later. But what has this got to do with doing the dishes you ask?
We’ve all had discussions with our kids over doing the dishes. I can still remember my daughters response like is was yesterday after reminding them the dish where waiting in the kitchen… “Yes Dad … in a minute”. I can also remember watching as the small pile of dishes started to grow as the minutes turns into hours.
After two daughters, the same discussions, I have come to the conclusion … there is only two methods to doing the dishes. Do them after each meal or leave them until the end of the day (or even until the next morning). Either way they have to been done.
If you compare the “do as needed plan” vs “the big pile plan” both require the same amount of work. You still have the same number of dishes to do whether they are done right away or later … so there is no savings is effort either way
The big advantage to “do as needed plan” … you always have clean dishes to use, and your kitchen is always clean. And of course Dad doesn’t get mad when he goes to kitchen for a snack.
Ultimately the “do as needed plan” this is nothing more than a good habit. Once you lived with a clean kitchen you will never go back. So how does this compare to financial matters?
Most people I meet deal with at least three financial institutions. Most have RSP’s, credit cards, mortgages and insurance policies(these are like the dishes).
They want to have enough insurance, pay off their debt and retire comfortably (this is like having a clean kitchen), but year after year they feel like things are going backwards.
Unfortunately for many the pain of reviewing their financial affairs is only eclipsed when thing are in turmoil. Just like “the big pile plan” method of cleaning the dishes many associate pain with planning because most of the time a financial review is only done when they lose their job, some one dies or they inherit a large sum of money.
The financial industry isn’t much help either. Big income is made when these major events happen. The stress drives you to make a decision, but later regret it. (Ask all those people that took their inheritance to buy rental real estate in Los Vegas!)
So what is the solution? Here are three things you can do …
1. Create a habit of reviewing your financial affairs. Small regular reviews are easy to deal with. The key is to plan these like a doctors visit. Every 6 months or at least once a year is good.
2. Plan for larger decisions in advance. If you know your income is going to change, you will be selling your home etc. plan now. Spend some time reviewing your options now BEFORE you have to make a decision. Give yourself time to reflect.
3. Put your plan in writing. Do a written before and after game plan. In three to six months it how will you know that your plan is working? A written plan is the frame work for future decisions, and if you need to make changes along the way. Now you can create a financial life that works and life you can enjoy.
One more question you need to ask yourself … is your current provider(s) on the same page as you. When was the last time they called you, met with you. Do they provide a comprehensive written plan. If they don’t provide this service it maybe time to start shopping around. Remember it is you that has to live the decisions you make … not your bank.
Making good financial decisions is like doing the dishes … we don’t like to make them. But nothing is worse than doing all same work but still having a dirty kitchen, food encrusted dishes and flies buzzing around your house. Keep it up to date … and you can change your life (and your kitchen).