You Can Do This! (Will You?)

Talking Money: Everything You Need to Know about Your Finances and Your Future
by Jean Chatzky

(Page 4 of 4)

A revelation: From a purely numerical point of view, there isn't any-thing that complicated about financial planning. You figure out how much money you need, what sort of savings and investment return it'll take to get there, and you make a plan that will get you to your goal. A handheld calculator is the only tool you may need. Especially when there are only a few items on your list, it's pretty easy to do the math.

But as your goals get a little more complicated-as you're trying to save for a car, invest for college, put money away for retirement, and pay down your mortgage simultaneously-you'll want help. The cheapest form of sophisticated help available is an off-the-shelf software package. I'm a big fan of Quicken; my husband and I have been relying on it to track our spending and our portfolios for years. But you'll find many of the same tools in Microsoft Money, or on the Web sites of just about any large financial institution. Using these tools, you can run through many of the same calculations that a financial planner would run either with you or for you. (Little-known fact: Many financial planners rely on similar computer aids-just like many tax preparers rely on souped-up versions of Turbo Tax, a soft-ware product you can buy yourself.)

The downside of doing it yourself? You really have to do it your-self. I'm not kidding. Gary Schatsky, a New York-based financial adviser, goes as far as to say that he "bets" most of his clients could do their planning on their own. The question is: Would they? "Most of them are so focused on their families or their own businesses that they don't have the time to do it," he says. "I have clients who Talking Goals manage portfolios for a living. They know small cap stocks like the backs of their hands-but their personal finances specifically, they don't have a lot of time to spend on."

Doing your own financial planning means taking the time to make sure your plan makes sense. Doing well by your money means revisiting that plan every six months to a year to make sure it still makes sense. And you'll have to commit to putting your plan in action, too: opening the accounts, buying the mutual funds, purchasing the insurance, working toward your goals. By far, more people do this themselves than hire someone to help them. It's completely possible-it doesn't even take that much time, just a day or so to get organized, then a couple of hours each month to stay that way. You just have to commit to it, like you'd commit to a job search or earning a degree. It's a matter of habit-and of making it stick:

The Big Three: Things To Take Away From Talking Goals

1. If you don't know where you want to go, you're never going to get there. So sit down with pencil and paper and rough out your long-and short-term goals. A legal pad is your best friend.

2. The next step is to understand financially what it'll take to achieve those goals on your list. That means doing enough research to attach actual numbers to your goals.

3. Accept the fact that none of this will happen overnight. But small habitual changes in the way you handle your money can have an enormous impact on your overall financial picture.

Seven Ways to Make a Good Habit Stick

The way to make managing your money seem like a natural ex-tension of the rest of your life is to make it habitual, a regular part of your routine. That's true whether we're talking about paying all your bills on time (which we'll do in Chapter 2), keeping track of your expenses (Chapter 3), or having regular money discussions with your spouse (Chapter 11). But how do you do that? If you've ever tried to adopt a new habit (and who hasn't?) then you know: Some stick but some vanish as soon as the next sun rises.

Study after study shows that you have to have patience. It takes twenty-one days for a daily behavior to become a habit. A weekly or monthly behavior takes even longer. The difference between successful attempts and failures is that people who are successful do the following:

1. Keep a record. For new habits, a daily journal is the best medicine, suggests Kelly D. Brownell, a professor of psychology at Yale University. If you like numbers better than words, a daily graph noting even the tiniest improvements often works as well.

2. Organize your environment to help-not hinder. You want to keep things that'll help you reach your goals nearby-and keep temptations as far away as possible. That may mean leaving your credit cards in a drawer at home if you can't think of a reason you'd need them that day. It also means setting up mechanisms to make your accomplishments come easier. For example, when Michelle and Adam, a Seattle couple, were trying to get themselves to stick with a budget, they kept a spending log on their pillow so they'd re-member at the end of the day to write down every expense.

3. Don't set yourself up for a fall. If you've hated research since the time you were in junior high school, you're probably not going to love spending hours in the library (or even online) re-searching stocks. Don't fight this reluctance: Go with it. Instead of forcing yourself to pick a new stock or fund every time you have a few dollars to invest, schedule automatic monthly withdrawals from your checking account and have the money deposited into a mutual fund that you can stick with for the long term. Likewise if balancing your checkbook is what you dread, buy a software program that'll do all the actual figuring for you. You can thus make these tedious tasks nearly effortless.

4. Reward yourself for good behavior. Just make sure that your rewards don't work against your ultimate goals-for example, if you're trying to save money, your reward shouldn't be spending an extra $30 at the Gap, it should be something free like an extra-long soak in the tub. Likewise, don't punish yourself when you experience a setback. Let's just acknowledge right now that you will. A friend will come into town for a few days and you'll go on a little Visa bender. Give yourself a break and get back on the plan as soon as you can.

5. Seek out support. Sometimes working with another per-son- or group of people-can provide just the boost you need to get with the plan. It can be a group with similar goals, like an in-vestment club filled with beginners who all want to learn the basics of research, or a single individual-perhaps a money therapist- who can help keep you on the right path through a series of well-tested suggestions. Some people find that quarterly trips to a financial adviser who can provide structure and encouragement are enough to keep them on the straight and narrow

6. Keep going-even when you feel down (especially when you feel down). By actually doing something over and over again, you'll gain a feeling of accomplishment-even power. That's why it's so important that when you find yourself feeling frustrated and overwhelmed by something, you do just what will help you conquer what's getting you down. When you're feeling fat, you should hit the StairMaster instead of the refrigerator. And when you're feeling poor, you should sit down with a pad and paper and figure out just how much money your new habits are saving you. Two dollars a day saved by walking to work rather than taking the bus may not sound like much, but it adds up to more than $500 a year. Once you write it down, focus on how the accomplishment makes you feel. Concentrating on the change will make you feel energized. Think of it as insurance for how you'll behave tomorrow.

7. Trust yourself. Don't let your feelings of self-doubt get in the way. Whether you realize it or not, it took time and practice to develop your current habits. It'll take the same time and practice to develop the ones you want to adopt for the future.

Copyright © 2001 by Jean Sherman Chatzky. All rights reserved.

About the Author

Known to millions of readers and tv viewers, Jean Chatzky is the financial editor of NBC's Today show and also appears on CNBC. She is a regular columnist for Time, Money, and USA Weekend magazines. She is also the author of Pay It Down!