Advice – Are you financially blind? (And a Free Tool to fix it)

I will always remember one of my first clients at Xentum.  It was a couple in their late 50s and the husband/father of the family was approaching retirement in his head.  I specifically remember this client as they brought a box of paperwork into the office with the message:

“There you go, can you sort through that and let me know when I can retire”

It will always stick with me that particular sentence.  At the time, I found it unbelievable how someone had worked so hard for 30 plus years had no idea how much or what they had in savings, life cover or investments.  They had of course been sold all sorts (some good and some bad) and had merely switched off from the issue of finance.  

They weren’t alone in switching off from their finances

As I got to meet more and more clients it became clear to me that they weren’t alone in emotionally switching off from their personal finances.  In fact it became a pattern and most had really benefitted from big rises in house values, good savings rates and some good policies that they were sold back in the day. They benefitted from the rises across the board and yes I am sure they all experienced bad times but this was the golden era for savings and wealth and yet not many knew where they stood financially,at least they didn’t when they walked through our doors.  Ask yourself right now, do you know where you stand financially?

This particular couple in their 50s turned out ok.  We got them into good shape, getting rid of some of the dross or wastage, simplified things a lot and put them on a fairly simple course for retirement which happened a few years ago.

I can’t help but think that my generation is not going to be as lucky.  Quite a lot of my business owner clients are seeing good days for their businesses but personal finance has never been as hard particularly with all the low brow information out there – invest in this, skip the latte, blah blah blah).  We have historically high property prices and large deposits required, low or zero savings rates and pretty high tax rates.  I am an optimist but to be honest, it is difficult to save money now, the most recent stats about people in their 30s only backed this up.  I think it is more important than ever to create wealth from entrepreneurship but with that comes responsibility of how you manage that wealth.

How do you know where you stand financially?

The biggest issue I see with business owners is that they are so busy with their business and the company finances that they don’t spend enough time seeking transparency with their family finances.  I will keep on saying it, but most business owners know their company cash flow but not their personal cash flows.  I think this comes from the same behavioural trait of the couple at the start of this blog.  For some reason we don’t like engaging with our finances.  

But let’s not give up.  The starting point is to gain transparency with your finances.  If you work out what your net worth is and an overview of your income and expenditure, you will make huge steps to improving your long term finances.  If you know where you are financially, you will be better equipped to make sensible decisions with your money and allocate your resources in a better way.  This is why I have included a free net worth and income/expenditure spreadsheet in this blog.  

This is the one I use personally to know where my family stands financially and what I use with all of my clients as a continual reference point.  Yes this can be done electronically and there are good tools but there is something about this spreadsheet that works.

You can thank me later or buy me a beer.  The chap who is retired did 🙂

Click here to get this awesome free tool.