The Four Threats to Your Financial Future — Part Three of Four
By: J Scott Foster
Tags: Personal Finance, Financial Danger, Financial Planning, Financial Advisor, Financial Wellness

Threat #3 — Disorganization

Life is chaotic, complicated, and messy. It can wreak havoc on how well we see things financially.

I had a client who brought her financial paperwork to me in grocery bags, which I think we can all agree is the epitome of disorganization. Still, the goal of getting our finances in order isn’t necessarily to assemble all your financial information on a tidy spreadsheet. It’s better than a Ralph’s bag, but not nearly good enough.

There’s another form of disorganization that is equally dangerous, and it is the appearance of being organized.

We have some new clients who come in with a complete spreadsheet of their finances and cash flow. They have all their documents in neat file folders. On one level, they are organized.

But essential ingredients are missing. To see what’s missing, it’s critical to step back and look at the whole picture, not merely the impeccable details. Because if you look at how they currently make their financial decisions, you see that it more closely resembles a junk drawer.

It’s similar to a chef in a kitchen. He may have all of his ingredients and spices appropriately labeled on the shelf. But when it comes time to cook, how is he using those ingredients? What amounts? What’s behind each decision?

Unless he understands how everything interacts and has a purposeful, organized process, his dish probably won’t taste good.

If there is no order to the decisions made and no priority to the cash flow allocations, your financial masterpiece will not satisfy anyone.

A common manifestation of financial disorganization is past decisions that made sense within the circumstances but no longer fit the present reality.

For example, when we first examined a prospective client’s portfolio, he had about 2 million in assets. His auto insurance only had a liability protection limit of $25,000. If he were sued, it exposed his 2 million to substantial loss. He agreed to the auto insurance limits many years before when his income and assets were far less.

It was never addressed because the man had one financial institution caring for his assets and another for his insurance. Neither asked about the other. Each financial institution was only focused on its area, unaware of how decisions might affect other aspects.

This disorganization and lack of coordination are common across the spectrum of assets building, liability management, cash flow choices, and protection issues.

In the end, you want an organized system and a tested process that allows you to organize your finances holistically within a hierarchical structure. From that starting point, you are then able to test and synergize the different elements.

These threats can be scary and challenging to face. Still, they can be overcome.

Through careful planning, accurate information, and an organized holistic approach, you can defeat these four threats to your financial future.

That’s where the process of Optimal Financial Wellness can help. It’s a multi-faceted approach to wealth management that anticipates the pitfalls and plans accordingly. Because yes, beyond here, they may be dragons, but dragons can be beaten. You just need courage and a plan.

Next…Threat #4 Your True Cost of Living