If you are like most women, you have probably cleaned out your closet a couple of times. If you can relate to this you then know the amount of unnecessary items we are able to accumulate. While cleaning up, you probably looked at things that you once you swore to yourself as you were whipping out your wallet, cheque book or credit card, that you need. However today as you spring clean your closet, the items are still hanging brand new and never worn and right now they just annoy you. They were clearly never that important to begin with and at the moment they just clutter your closet .You spend your week in a knot of anxiety because you feel that you still need to go buy something to wear for the wedding on Saturday!
Even with our financial lives we have to evaluate the clutter. We may have a savings account some insurance policies, some shares, some offshore investments etc. These are not in themselves bad to have and in fact commendable because the intention of saving and investment is there. In our Centsible Woman workshops we have met a lot of women who have genuine intention of saving and put money aside in all manner of places. The same feeling we get when we feel we do not have anything to wear sometimes is exactly the same feeling when we get when we feel we have to play catch up with our savings. However putting money into many different pockets without direction ends up sometimes being clutter and we are left feeling that we are running around in circles in our financial lives and not really achieving anything. Fashion consultants recommend starting with the look you are trying to achieve in mind before shopping. The problem is that most of us do not have this end game in mind and hence shop more on impulse rather than a defined look. Even with our finances we usually don’t start with the specifics of what we want to achieve hence get easily influenced by the financial salesperson who may come in the form of an insurance broker, fund manager, a banker, a credit card issuer, stockbroker etc. We end up accumulating a lot of investments that end up not working for us because of the lack of a definite objective. Just the same way it is advisable to define the look you want is the same way you need to first and foremost define what you would like to achieve.
We are almost half way through the year. Like most people your new years’ resolution may have been to save more. You may have started doing this to some extent or you may have not. Allow yourself to take a step back and think about what you want to achieve. This may be that you want to save enough for your children’s education, for retirement, to buy a house, to go on holiday etc. Any solid financial plan starts with setting of these financial goals because this will in fact determine which financial products you use just like defining your look determines what clothes, colours, styles, cuts etc that you will wear. By doing this we will avoid being influenced too much by the sales person (who at the end of the day wants to make money off you) and it gives our money direction and sense of purpose. The way you save for retirement and the vehicles you use is not the same way you will save for your child’s education next term. Your closet has different sections for different things. Different financial products have different uses and you can combine these products according to your goals. Your investments without fail will do either or a combination of these three things. They will keep your money safe, increase in value or provide you with an income. If your money is for school fees in three months you want to keep this money safe. If it is to buy a house in 5 years you want to grow the money. If it is to fund your retirement you probably want it to provide you with an income in the future.
This process is then followed by what we call evaluation of financial status. This enables one to see what they have, what they own, what they earn and how they spend it. Just like you may have items in your closet that you convinced yourself would come back to fashion, will fit after the diet, will look good with your sisters scarf, there may be financial items you have that were a must have that are no longer in line with what you want to achieve. This may be credit card debt, a certain policy, the stock that just doesn’t seem to have prospects, a particular spending habit etc.
Unclutter your financial closet. You will find yourself more focused and able to draw in the information related to achieving your objective. You will notice the progression as you stop running around in circles because of clear financial goals. There is no better time than now to get over the hurdle and start creating a calmer more financially sound life.
Published in True Love Magazine – July 2010 Issue