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The Biggest Threats To Your Financial Wellness: Fear and Hesitation

You’ve made it to the end of our three-part series about the biggest threats to your financial wellness. (Wanna catch up? Check our Part One and Part Two, then come back.) If you’ve noticed a theme, it’s because the biggest threats to your finances come from within.

In this post we’ll discuss two of the most common failings people experience: fear and hesitation. If you let these internal feelings dictate how you live your life and use your finances, you’ll struggle to achieve your goals.

Financial Fears

Money is a tool. Any good tool is designed to make a person’s work easier. You have to let your money work for you to make your life and future easier and better. But uncertainty in the market and fears powered by “what if?” thinking can threaten the power of your financial strategies. Decision making based on fear is nearly as dangerous as impulsive behaviors. Fear clouds your mind and removes objectivity, turning everything into a dire situation when you need calm and collected observation skills.

Allowing fear to dictate how you utilize your personal finance is a surefire way to reduce its potential. Panicked selling during market downturns, jumping on investment fads, and other fear-motivated behaviors can result in short-term gains but long-term lessons. It’s all about time in the market, not timing the market. Combat your fear by building a strong financial strategy and standing firm in it. Your future will thank you.

Hesitation and Personal Finance

Fear and self-doubt can do more than motivate poor decisions: they can cause paralysis by analysis. If you are facing a large problem and feel overwhelmed, useful data can make it worse. The decision becomes larger than it actually is and you end up missing out on a valuable window for your decision, leading to lost opportunity cost. When it’s time to act, you won’t have time to hesitate. Do your research, consult with a trusted advisor, and act decisively. Commit to a plan and then measure the result. Even if it doesn’t go as well as you hoped, you gain useful insight for future initiatives. It can also teach you a lot about yourself, which is always valuable for your future.

Overcoming Yourself

Unfortunately, fear and doubt will always be present in your financial life in some way. You have to accept them as part of yourself and learn to use that energy when making decisions. Any time a decision has risks associated, you will have some sense of fear or doubt. If you allow your feelings to dictate your financial life you will be stuck for a longer time than you need to be. You are master of your own destiny. If that’s not empowering, we don’t know what is.

Want to figure out a bold financial strategy that works for you? Need to determine your risk tolerance? Complete this questionnaire to determine how we can help you guide your financial future.

The Four Challenges to Building Wealth: Financial Organization and Coordination

You’ve made it to our final segment of our series concerning the four challenges to building wealth. We’ve explored hurdles like financial institutions and ways to adopt their strategies, lost opportunity cost, and the velocity of money. Your biggest challenge to building wealth though?

It’s you.

No matter how savvy and dedicated you may be to growing your wealth, it won’t work if you are not approaching it in an organized and coordinated way.

You Can’t Grow What You Don’t Know

The biggest reason financial organization and coordination matters is because if you can’t track your financial life you can’t determine its performance. So many people let their accounts, bills, mortgage, and more stay separate and unassociated in their minds that it’s a miracle they can pay their taxes every year, let alone handle their bills every month. Without a centralized hub for your finances that makes it simple to check your financial health, it can be almost impossible to grow your wealth effectively.

Determine What Works for You

There are plenty of ways to build that hub. Some people opt for spreadsheets that track net worth and monthly bills. These can be powerful, since they’re self-driven and require you to interact with your money in an active manner. Other people opt for web-based applications that aggregate your financial data in one place. Some utilize desktop-based software to great effect. The secret is in determining what system best meets your needs and helps you along your path to financial wellness.

Consistency is Key

Once you’ve figured out your system of financial tracking, you have to build that into your life. Set calendar reminders. Create appointments with yourself. If your tracking and managing does not remain consistent, your progress will suffer for it. Being able to observe trends such as ballooning restaurant spending or growing interest on credit card debts can help alert you to issues before they get out of hand. You should do whatever it takes to make your financial health check part of your regular routine.

Coordinate Your Financial Goals and Strategies

Once you’ve found a method that works for you and made it part of your routine, you need to use it to track your net worth as well as your additional financial goals. By tracking goals such as paying off student loans, building home equity, or eliminating high interest debts, you can begin to coordinate your finances to support those goals.

If your equity growth isn’t outpacing growing interest, you should shift your focus and capital to eliminate those debts. Need to grow an emergency fund more quickly? Consider shifting funds away from your investment accounts and toward liquid savings funds.

By putting your financial health in one accessible, trackable space and tying overall performance to your goal progress, you put yourself firmly in the driver’s seat. It can be eye-opening, intimidating, and uncomfortable, but growth comes from discomfort. The difficulties you experience now can either teach you important lessons for your future well-being or you can ignore them, as so many people choose to.

Ready to tackle those financial goals and build a future to be excited about? Contact us to get started.

Four Challenges to Building Wealth: Rules of Financial Institutions

In continuing our exploration of the four challenges to building wealth, we’re looking into the rules of financial institutions today. We’ve written at length before about how financial institutions operate to get and keep more of your money. Take the time to educate yourself on these behaviors and how they get hold of your money and keep your finances operating in their ecosystem. These are definite hurdles for your wealth, but these principles can be adapted so you can grow your own personal finance.

Treat Your Finance Like a Bank

One way you can apply the rules of financial institutions to your own wealth growth is to remove some of the “personal” from your thinking about personal finance. Think of your funds as though you are a bank:

You want your money

  • Banks want you in their ecosystem. They want you to keep your funds with them, as much as possible. Work to hold onto your money with the same dogged determination. Eliminate high-interest debts and reduce what bills you can.

You want your money systematically

  • Sure, automatic deposits are convenient and secure, but that systematic deposit is more fuel for the bank to use while they hold your funds. Use these systems to your advantage, but keep track of your automatic payments and deposits. Cancel those you don’t use and keep your money systematically storing away for the future.

You want to hold your cash for a long time

  • Your balance year-over-year should be a gradual march upwards. Holding onto your funds and committing to the security of that growth will provide your life the security and abundance you deserve.

You want to give as little away as possible.

  • You never know when you’re going to need your emergency fund. You never know when the opportunity to invest in your dreams will arrive. Keep your funds around for when lighting strikes- good or bad.

Know All of the Details

Do you know your accounts’ rate of return? What about the annual percentage rate? Do you know if your mortgage or other loans have a prepayment penalty? Banks and other financial institutions don’t enter into a financial agreement or partnership without knowing every detail, and neither should you.

The details you don’t know can be what leads to financial disaster. Take the time to read, know, and clarify the details that the banks love to hide in the small print – it can be eye-opening.

Make Your Money Do Multiple Things at a Time

Sticking all of your savings in one account doesn’t make sense. In today’s uncertain world, you need to use a diversified strategy to make your money work harder for you. Other methods of saving your money include:

  • An Emergency Fund: This should be kept separate from your main checking and savings account. Keep the funds hard to access to prevent impulsive use and take advantage of automatic transfers to keep it juiced up. Most experts recommend that you have 3-6 minimum of living expenses in your emergency fund.
  • Investment Accounts: Exchange traded funds and mutual funds are ways to invest your money in shares of companies’ stock. You’re buying a piece of their business, in the hopes that the performance improves and more value is generated for your account over time.  
  • Retirement Accounts: 401Ks, the now-rare pension, and IRAs are types of deferred-income retirement accounts. Different types have different tax-incentives, and each offer crucial ways to build your nest egg for eventual retirement.

If you can find ways to accomplish more than one thing with a dollar, you’re hitting the big leagues alongside those institutions that are too big to fail. Spreading your investments out amongst these different accounts helps shield you from market volatility that can eat your returns, as well as providing vehicles to achieve different goals with your money.

Don’t Accept the Status Quo

The real secret to making your personal finance work as hard for you as the banks’ treasury does? Arm yourself with ambition and an abundance mindset. Know that there is always another option to explore that can benefit you in different ways. Don’t accept the current situation or enter into lopsided agreements that offer no benefit to you. If you are not growing or improving in your current financial situation, or career, or hobby, or workout routine why stay there? The world is full of alternatives worth exploring until you find something that works best for you.  

Ready to conquer the traditionally lopsided relationships between individuals and institutions? Learn more about personal finance with us at JB Wealthfit.

The Four Challenges to Building Wealth

If you’ve set up automated deposits, selected an investment mix, and have a general awareness of your overall financial status, you’re doing well. This is especially true when you consider the huge number of Americans who have under $500 in savings and don’t track their spending.

Unfortunately, there’s a lot more to growing your wealth than setting up these healthy behaviors. In fact, there are four distinct challenges to building your wealth and overall financial wellness. We’ll take deep dives into each of these factors in the coming weeks to help arm you against these threats to your wealth building strategies. Today we’re offering up a preview of the posts to follow as part of our four part educational series. We’re hoping you tune in and learn along with us each week.

The very real threats staring down your personal wealth include:

Lost Opportunity Cost

You might think that if you spend one dollar, you’ve effectively lost one dollar, right? Sadly, it’s not that simple. If a situation arises that requires you spend money you would normally save or invest, you’ve lost more than just that amount of money- you’ve given up what that dollar could do for you in the future.

Whether this spending comes from unexpected bills (like medical expenses or emergency car repairs) or from impulse spending (we all remember Cyber Monday), the outcome is the same: you’ve traded the future growth potential of that dollar for the use of it right now. In our deep dive, we’ll look further into how to measure lost opportunity cost, the role of volatility in assessing it, and how to use these measurements to make decisions about your finances and life.

Rules of Financial Institutions

When is the last time you read your bank or credit union’s service agreement? Do you know the steps to take if you want to close your current checking account and open one elsewhere? There’s a reason why the fine print is small and difficult to discern; hidden within service agreements and fine print are many policies that make your money work harder for the institution than it does for you. It can be difficult to disconnect from your current bank’s ecosystem. They want to ensure that while your savings account earns 0.01% interest annually they can loan your funds to a credit card user and charge them 27% APR.

In our examination of financial institutions’ rules, we’ll reveal how they make it difficult to use your money, how to find a more beneficial partner, and ways you can use banks’ approach to finance to guide your own wealth management strategies.

The Velocity of Money

Velocity is the speed of something in a given direction. While “the velocity of money” is typically used by economists studying the GNPs of different countries, it also applies to your personal finance. In this setting, it means how you get your money to do more than one thing for yourself at the same time. Whether this means opening a higher-yield savings account to hold your quarterly payments for freelancer income taxes or refinancing your mortgage to remove a PMI and expedite your amortization rate, figuring out a way to make your finances work harder and faster is key to your financial health.

In our dedicated blog post we’ll further explore the velocity of money, its potential impact on your financial wellness, and ways you can adopt financial institutions’ strategies to make your money work harder.

Financial Organization and Coordination

You can’t build what you don’t know. It’s not enough to be aware of your finances – you have to aggressively coordinate and organize your money so that it moves and grows in a productive manner. This topic is one of the largest stumbling blocks for the general public – our financial systems mean ignorance is bliss for many. But taking time to organize your money and enact a strong plan will empower you and remove a lot of the stress associated with personal finance.

We’ll look into ways to organize your funds, why you should treat your household’s finances like a business, and how to get over the initial fear and pain that comes from discovering where your money may have gone wrong.

Wrap Up

The short story? These are in no way simple challenges to tackle. But taking the steps to empower yourself through this learning will put you on the path to building your wealth and improving your overall financial wellness.

Ready to tackle these challenges together? Complete this questionnaire to help us better understand what value we can bring to your life. It’s time to start making your money work for you.