Who Wrote Your Financial Plan?

If you fail to engage with your financial life, corporations will profit from your inaction. 

When it comes to financial planning, many of us find ourselves in the same boat: we’ve never worked with a financial planner. And honestly, who can blame us? Navigating the world of personal finance can feel overwhelming, especially when it seems designed to keep us in the dark.

If I were to ask you whether you have a financial plan, chances are you’d say no. But here’s the twist: you actually do have a financial plan—it’s just not one that serves your best interests.

The Plans Already in Place

Let’s take a moment to unpack the “plans” that are likely operating behind the scenes in your financial life.

1. Credit Card Companies

If you’ve ever relied on credit cards, you might have noticed that they offer tempting rewards. But what they really want is for you to rack up interest charges. This plan doesn’t benefit you; it benefits them. Many people end up paying thousands in interest over their lives while chasing points. It’s a strategy designed to keep you spending rather than saving.

2. Your Employer

Your workplace has a plan, too. Unfortunately, it often involves paying you as little as possible while maximizing their profit. If you’re enrolled in a 401(k), the reality is that many of these plans feature high-fee investment options that don’t significantly outperform cheaper alternatives. The result? You quietly siphon off your retirement savings, all while fund managers profit from your labor.

3. Banks

Your bank’s plan is to take your money, lend it out at a higher rate, and offer you a pittance in interest in return. Many people keep large sums in low-interest checking or savings accounts, missing out on opportunities for better returns. If your money is sitting idle, it’s essentially working against you.

In essence, you do have plans in place, but they’re written by those who want to profit off you—not by you or anyone invested in your well-being. It’s a frustrating reality, especially for those of us who are skeptical of the financial industry and its motives.

The Cost of Inertia

For many, the inertia around engaging with personal finances is not a neutral condition. It often leads to lost money and resources flowing to companies that don’t align with our values. The financial industry has made it complicated and shame-inducing to manage our money effectively, reinforcing the idea that if things aren’t going our way, it’s our fault.

This narrative can create a sense of shame that prevents us from taking charge of our financial well-being. We might think, “I should be better at this,” or “It’s too complicated.” But remember: the systems in place benefit from this inaction.

Taking the First Steps

Even if you’re not ready to hire a financial planner (though I’d love to help if you are!), there are actionable steps you can take to reclaim your financial future. Here’s a roadmap to get started:

1. Evaluate Your Cash Situation

How much cash do you have on hand, and what interest rate are you receiving? If you’re like most people, your money is probably sitting in a big bank, earning next to nothing. Aim to keep one to two months' worth of expenses in a checking account and move any extra funds to a high-interest savings account. As of September 2024, there are savings accounts offering around 4% interest—no risk involved! This simple move can maximize your earnings without any additional risk.

2. Know Your Living Expenses

Understand what it costs to live your life. Track your rent, mortgage, utilities, groceries, and other necessary expenses. You don’t need to track every dime forever, but knowing your “burn rate” can help you set realistic savings goals and prepare for life’s bigger expenses, like vacations or charitable contributions.

Understanding your living expenses is also crucial for assessing your financial flexibility. When you know how much you need to cover your basic needs, you can make informed decisions about things like how much debt you can manage or how much you can afford to donate to causes you care about.

3. Scrutinize Your Investments

If you have money invested in a 401(k), IRA, or brokerage account, take a close look at the fees associated with your funds. Look for the net expense ratio; many funds charge exorbitant fees that eat away at your potential returns. Opt for low-cost index funds or ETFs that track the market without excessive trading—these can often be found for a fraction of the cost.

For example, if a fund charges 1% annually, that may not seem significant at first. However, over decades, those fees can significantly erode your savings. Choosing lower-fee options can lead to thousands more in your retirement account over time.

4. Break the Complexity Myth

One of the most important steps is shifting your mindset. The notion that personal finance is complex and beyond your understanding is often a tactic used by financial institutions to keep you from taking action. Remember: you have the intelligence and capability to be the owner of your financial future.

The truth is, financial literacy is accessible. With the right resources and a bit of determination, you can demystify the financial landscape. Start small and build your knowledge over time; it’s an empowering journey.

Ready to Dive Deeper?

If you’re ready to take these steps or want to learn more about how to make your money work for you, I’d love to chat. Together, we can break down those barriers and develop a plan that aligns with your values and aspirations.

Taking control of your financial future is not just a personal victory; it’s a stand against the systems that profit from our inaction. Let’s take the first steps together toward a financial life that truly serves you.

Thanks for reading, and here’s to taking control of your financial future!