Brandin assists the sales team in the development and expansion of the Advicent enterprise market. He is passionate about sharing the value Advicent brings to companies throughout the financial industry.
After you have moved your client through the entire financial planning process and given them the key to the door into a seemingly successful financial future, what happens next? Yes, your plan should lay out a client’s goals and what they need to do to get there. However, do all your clients really know how to meet the expectations of their financial plans?
Believe it or not clients, many have no idea how they can realistically change their financial lives to meet the goals and objectives of the plan you just created for them. Most often these are your young clients who may not have a lot of net worth.
5 simple steps for successful money management
To ensure that your clients are following their plans, they need to first know how to properly manage their money. Below are five simple steps clients can take to ensure they can meet the expectations of their financial plan.
1. Create a budget
A poll taken from Gallup shows that most Americans do not use a budget. The reality is that only about one third of Americans use a budget to track income and expenditures each month.
In the same poll, the most frequent response to why people were skipping a budget was that they spend it all anyway. The ironic part of this statistic is that creating a budget is one of the easiest money management steps you can take and is vital to effectively manage your finances.
2. Track spending
Much like creating a budget, tracking spending may initially feel like an unnecessary chore for clients; however, technology has made tracking spending easier than ever. Ultimately, it is an easy way to figure out how much they are actually spending on non-essentials.
This is especially important for individuals and families who may be living paycheck to paycheck. Tracking spending will also help create a budget with realistic numbers to which they can actually hold themselves.
3. Keep credit card expenses to a minimum
There can be perks to using credit cards, but at the same time it is very easy to abuse them. I am sure we have all heard a horror story about a person who has spiraled into a black hole of debt as a result of abusing credit cards.
I would encourage anyone who is not disciplined in their financial life to avoid credit cards until they have a solid financial foundation built. To those who think that you cannot build a solid credit score without a credit card, that is false. Here is an article if your clients would like to learn other ways to build a credit score: 7 Ways to Build Credit Without a Credit Card.
4. Plan for the unexpected
Perhaps one of the most overlooked aspects of proper money management is planning for the unexpected. So what does this mean?
Ideally clients should create an emergency fund that stores at least six months of net income for those “just in case” situations. This is not always realistic at first to clients, but slowly building an emergency fund can save them from going into debt for a cost they cannot avoid.
5. Help the money make money
Proper investing can be one of the easiest ways to make money. Investing early and often can take significant financial pressure off of a client, especially young clients.
If a client can afford to invest, this can be their saving grace in reaching their retirement goals. At first investing their money will not always make them a lot, but the slow accumulation can significantly impact their ability to reach their financial goals.
Setting a foundation for financial success is vital but often overlooked by advisors when they are working with clients who may not be knowledgeable on how to manage their money properly. Much of the money management concepts I covered may appear to be common sense, but you cannot always assume these are money management steps all of your clients are taking. Any proper financial plan should set expectations for a client, but if a client does not know how to meet those expectations what is the point?
Click here to learn more about leveraging the Narrator® Clients portal from Advicent to engage your clients and give them 24/7 access to their financial plan and PFM tools.