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…And This Is Your Brain On Money

Many studies have been done regarding our spending habits and relationships towards money. It's different for everybody, as we all have our own habits and past issues that govern how we relate to our money at this stage in our lives. In the past generations going back to the 20's-50's, the envelope method was the preferred way of dividing up a paycheck. The check would get cashed, and the appropriate amount was put into the envelopes marked rent, utilities, phone, groceries, etc. Rarely in that era was there an envelope for vacations, movies, entertainment and the like- it was for the most part the essentials, with the remainder (if there was any) put into the sacred savings account for the rainy day need. These days, we are prone to more impulse buying, spending sprees, and the use of plastic. Times have changed, and so must our spending habits.

When dealing with new clients, I often ask questions usually not discussed, such as who manages the money in your household, who paid the bills in your parents home, what is the worst and best experiences you've had with money, and others. These questions help me to understand how the client relates to money, strengths and weaknesses, fears and elections. To best understand your relationship with money, it's important to delve into that deep, dark place of the past to help you with your relationship of the present, and the future. Many people do as they observed by their parents, but alas; we are in a different time both economically as well as in the technology age. Things are different in all areas of life, and the same holds true for how we deal with the management of our money. My fellow humans, it's time to evolve…

First and foremost, it's important to note that your portfolio is not your parent's portfolio. Your goals and objective are different, and so should your style of investing. Your parents did not have the same investment vehicles available to them as you have, and you should be taking advantage of everything out there that is suitable for you in your particular circumstance. I can't begin to tell you what's right for you, but you should be working with a financial professional with the expertise, tenure and education to guide you in the right direction. If possible, consult with a CERTIFIED FINANCIAL PLANNER™, one of whom has been educated in the vast number of areas to give you a trained view of your finances and assist you with the training necessary. In addition, a CFP® practitioner must attend and complete continuing education requirements, keeping him or her up on the latest of information for your benefit. Then, ask them about how long they’ve been in the business, feel free to check them out online, and make sure you are comfortable with them. But, I digress...

Always remember the mantra "pay yourself first." Delve into your retirement plan to see if it has matching, and if nothing else be sure to contribute the maximum amount they will match- it's free money. Not taking advantage of a matching program is like saying no when someone holds money out to you and tells you it's yours- and you don't take it: that makes no sense. Not unlike tithing, when you get paid, take a certain percentage and automatically put it into your savings account. There's nothing like watching the numbers grow in your savings and investments (well, laying on the beach with someone you love and a mai-tai is a close second!) but this is one of the many things a growing savings account is for... as long as you pay yourself first. Be sure to build up an emergency fund, equal to 3-6 months of your monthly household expenses to cover you for that unforeseen emergency. Keep it local and liquid, with the ability to lay your hands on it as soon as possible. Don't worry about not earning much interest: in the times of emergency, it's the last thing to worry about.

Ignorance is NOT bliss. Not knowing about your accounts or bills by leaving your envelopes unopened (yes, I mean you) does nothing to keep you informed. Sy Syms said it best when he said "An educated consumer is our best customer." He was so right. You should know what you have, good or bad- you can't make changes or decisions if you don't know the facts. Your future is up to you, so keep up on the present. Know what you have so you can make changes if necessary. You don't take a ride in the car not knowing where you are going: what makes you think you'll get to retirement if you don't pay attention to your investments? If you have aversions, fears or problems with any aspect of managing your money, address them head on. I don't pull my own tooth if I have a toothache, or open the hood of my car and blankly stare at the engine when it ceases to function: I bring it to a mechanic. So, take a good, hard look at how your brain relates to your finances, and be honest: if you need help, get it. If you're doing it because it's the way your parents did it, welcome to the 21st century. Times have changed: have you?

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