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Are you afraid of revealing your personal financial situation and being judged harshly by financial professionals, your parents, or other people in your social circle? If yes, then you are not alone.
According to a 2014 survey of 2,000+ U.S. adults commissioned by TradeKing Advisors, 57% of would-be investors say that the thought of speaking with a financial adviser in person (either in a face-to-face meeting or on the telephone) has stopped them from investing. Seventy-four percent of Millennials and 66% of Gen X have allowed fear to paralyze them.
Whether you are part of these generations or not, you don't have to be afraid.
Here are three steps that may help to confront your fears and increase your knowledge and net worth, with or without direct interaction with a financial adviser.
Realize that fears are grounded in reality (but not the way you may think)
If you are scared or reluctant to engage in a dialogue with a financial professional, you are not alone and you are not irrational in your fear. Financial advisers sometimes wrongly judge those they are trying to help. (See my story about being judged and Jonathan Fields' article for entrepreneurs, freelancers, etc. on how and why to stop slamming those you most want to serve.)
Based on my encounters, some financial advisers try to intimidate prospective customers. They often accuse me or the population in general of financial sins such as not saving enough each year; not getting the right insurance; not having a perfectly diversified portfolio; not understanding and managing risk properly. The truth is that we all fall short of perfection in personal finance, whether we are lay people or professionals.
I can look back at my saving, spending, and investing life, and assure you that I have made many mistakes. And I am still trying to correct some of these missteps. But, recently, after putting together a list of assets as I completed FAFSA on behalf of my college-bound son, I realized that I've made plenty of good decisions and these have allowed me to thrive.
So, even though fears of being imperfect and being judged are valid, they shouldn't stop you from pursuing financial goals and investing.
Figure out where you stand financially
One of the best places to start when facing down a fear is to get an understanding of reality. Even if your personal situation is frightening, you'll most likely find that documenting the facts is calming. Knowing where you stand is empowering and the first step in improving your situation.
Here are the key metrics to consider knowing about your personal finances:
- Annual income (salary, wages, bonuses, freelance or business income)
- Fixed expenses (minimum payments on loans, monthly rent or mortgage payment, insurance, etc.)
- Discretionary expenses (controllable and variable expenses such as groceries, dinners out, entertainment, travel)
- Amount you are saving or investing monthly (automatic transfers to a savings account, workplace contributions to a 401(k) plan, etc.)
- Loan balances, interest rates, and years or months until payoff
- Bank account balances
- Investment account balances (retirement accounts, brokerage accounts, etc.)
Whether you meet with a financial planner or not, having this information readily available can help you determine if you are steadily making progress and, if necessary, identify where you can make improvements.
The point of this exercise is to see where you are, not to compare yourself with other people or some imagined norm.
Identify resources that will help you stay on track or improve your situation
A third and crucial step is to find resources that can help you reach your goals, whether you hope to get out of credit card debt or build a multi-million-dollar portfolio. Now, if you have a financial background (whether self-taught or gained from college-level courses), you may know exactly what to do next.Here are some examples of natural next steps based on the information you may have uncovered and documented in step #2:
- Open a savings account and set up automatic transfers to fund this account
- Reduce fixed expenses by moving into a cheaper apartment or getting a roommate
- Cut down (at least temporarily) on discretionary expenses by cooking rather than eating out, seeing the sights in your hometown rather than traveling to a resort, etc.
- Start contributing to your 401(k) plan at work or increasing your contributions
- Consider ways of increasing your income, such as finding a better-paying job or earning freelance income
If you're not sure where to start, then you might consider tapping outside resources. You might take a money management course offered by your community college, an online resource, or church; borrow books on personal finance from the library (I recommend Jonathan Clements Money Guide by former Wall Street Journal columnist; disclosure: I received a copy from Mr. Clements); read personal-finance articles found on personal blogs or corporate sites, such as Money Under 30, Wise Bread, Good Financial Cents, Bankrate, and/or Yahoo! Finance.
To learn more about investing, take advantage of educational content offered by brokerage and investment firms. In many cases, you can watch videos, read articles, etc. without opening or funding an account.
Consider talking to a professional. Judge the worthiness of a financial adviser by her ability to offer valuable services and refrain from judging you. Walk away if you see a head shake, gasp, or eye roll; or feel a hint of condescension. A true professional understands that bringing value to you doesn't involve diminishing your value (or financial status) in order to make a sale.
Alternatively, engage investment services that don't involve face-to-face or telephone communications. Use screening and portfolio-building tools on online brokerages' websites or invest in a managed portfolio to get started in investing.
Don't let fear of judgment or regret of past imperfections stop you from making progress in your personal financial life, including the important area of investing. The goal isn't to be perfect but to move forward, whether clumsily or gracefully.