YOUR FINANCES
THREE OBSTACLES
TO FINANCIAL SUCCESS
Don’t let
procrastination or fear stop you from making the right plans
As a financial planner, I’ve seen what leads to wealth
building success and what leads to failure. My small business
owner clients have taken different paths before coming to
see me. Some had been do-it-yourself financial planners and
investors, some had never had a financial plan before, and
some had unsuccessful past experiences in using a stockbroker
or planner. All of these people had achieved some success
in their business lives. All were intelligent and energetic.
So, what kept them from achieving their wealth-building or
wealth management objectives? Of course there are practical
obstacles. But, in my experience, the more important factors
are often emotional and behavioral ones. Let’s look
at three common obstacles to building wealth that can inhibit
people from taking action to achieve their financial independence.
Procrastination
There’s a lot of truth to the observation that
says people spend more time in a year planning their vacations
than they do thinking about and managing their personal finances.
Some people feel they are so busy with business and home and
family obligations that they just do not have the time to
spend on their finances. They never actually forget that they
should be paying attention to their financial futures, so
they feel the stress of not taking the time to for planning.
But they have an emotional block that prevents them from getting
around to this critical task.
Why? Sometimes a business owner may be embarrassed to ask
for help, because it would show he doesn’t know as much
about how to handle his own money as he does running his business.
Other times, it may be nothing more complicated than having
trouble following up on good intentions. We all know folks
who have trouble putting their “New Year’s Resolutions”
into action. They’re perpetual procrastinators. Think
of the people you know who say every January that they’re
going to start going to the gym to work out but never got
around to it. I often find the same can be true for such people
when it comes to devoting time and energy to determine their
wealth-building goals and identifying the steps for achieving
them. Many of these individuals never complete a personal
or business financial plan.
Or, this type of business owner will suddenly snap out of
it and finally take action—with disastrous results.
To end the guilt over not planning, they will act impulsively,
making a few quick “gut” decisions to get it over
with. That takes a lot less time than prudently evaluating
the situation—spending months looking for a new advisor
or putting in hours crunching numbers to determine what investments
make the best financial sense. These men and women may feel
good about taking something off their to-do lists, but they
won’t be happy with the results.
Fear of
not making the right decision
Some people I meet have made very poor financial decisions
at one time or another in their lives that have cost them
a great deal of money. Frightened at the thought of making
more embarrassing and costly financial mistakes, the person
becomes like a deer in the headlights each time the idea of
choosing the right investment or financing option arises.
They avoid making choices that they need to make to ensure
the financial success of their families and their businesses.
I remember a small business owner who had taken a big step
in hiring his first CFO/controller, only to find that she
was not up to the task. Her actions hurt customer and vendor
relationships and cost the business money. But faced with
the prospect of repeating his mistake, he put off firing the
controller and hiring a replacement. As a result, there were
no improvements to customer or vendor relationships. His hesitation
was costing the business opportunity and making the owner
work harder, since he had to stand in and do the work of another
person in trying to patch damaged relationships.
Fear of Loss
One of the most understandable emotional issues that stand
in the way of personal and professional financial success
is fear: What happens if something goes wrong? How will I
be able to recover from a bad investment? We had a case at
my financial planning firm where a physician client wanted
help in evaluating possible strategies for growing his business.
We analyzed his options, determined the action steps required
to carry them out and evaluated the cost/benefits of each.
Crunching the numbers revealed that his most promising option
required a $1 million investment in diagnostic equipment to
expand his practice. While he could recognize the logic—it
takes money to make money—the physician balked at risking
large sums on his business. The physician needed support from
his financial planner, acting in the roles of business coach
and CPA, to show him that the risks were not as great as he
feared and that it was a sound business plan. Eventually,
the doctor overcame his fear of risking his hard-earned money
and agreed to the investment; since then, his business has
grown as the financial planner predicted it would.
Now that you can identify these emotional and behavioral obstacles,
I hope you’ll be able to see whether they stand in your
way, keeping you from making smart financial planning decisions
for your company and yourself.
Guy McPhail, CPA, CFP®, is president of Zdenek Financial
Planning, LLC.
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