financial planning

You Are The Chief Financial Officer of Your Own Life, Your Financial Planner Is A Consultant

When it comes to your money, it’s important to remember that you are the Chief Financial Officer of your own life, not anyone else. It can be easy to outsource this responsibility to a financial advisor, but that is the wrong approach to take. By becoming your own Chief Financial Officer (CFO) you’re taking ownership and responsibility for your financial outcomes. Any financial advisor or planner you use should be viewed as a consultant who is brought in to help you make the best decisions you can for your unique situation.

Why You Need To Be Your Own CFO

When it comes to your money and how you interact with it and use it, there’s only one person who should be ultimately in control of it….YOU! Remember, it’s YOUR MONEY and it’s YOUR LIFE, not anyone else’s. Because of this it’s vital that you take the primary role in your family’s financial matters.

Too many people are handing over complete control of their financial life to someone else and place themselves in a position of weakness. You’ve probably heard stories of athletes or Hollywood stars that filed bankruptcy because of a “financial advisor”. While this is obviously a sad event, especially for the people affected by it, I believe these types of things can be completely prevented. How?…by taking personal responsibility for your money.

Becoming The CFO Of Your Life

The first step to becoming your own CFO is to adopt the right attitude. It can be easy to believe that we are victims of fate, or something out of our control. To become a successful CFO you’ve got to look past this. You need to decide that you are the master of your destiny, not someone else. While it’s true that you are part of the overall economy and subject to both lucky and unlucky breaks, ultimately you’re the one in charge. Your circumstances may not be your fault, but they are your responsibility. Remember, you are the chief financial officer of your own life.

Once you have made the decision to take responsibility for your financial outcomes you need to make sure you know what you are doing and why you are doing it when it comes to the money in your life. Think about it, you can’t be an effective CFO if you don’t know what you’re “CFO’ing”, right? To build this knowledge you will need to establish a solid understanding of where you are currently and what you would like to achieve in the future. The basic steps are:

  1. Identify all the money that comes into and flows out of your life on a monthly or annual basis. This includes all income, all regular expenses, and all payments for past commitments (debt).
  2. Determine if there is a net cash surplus (extra money) that you can put towards any goals you may have, or if you are in deficit spending (adding to your debt).
  3. Establish what your short and long-term goals might look like and what will be required to reach them.
  4. Devise a strategy along with any specific action steps needed to reach your goals.

At the end of these steps you will have a solid base from which to begin your new job as “CFO of You, Inc.”. Steps 1 and 2 are something you should be able to do (or learn how to do) completely on your own. Knowing where the money comes from and where it goes is vital requirement in today’s world. Your financial planner can help you establish the skills and habits to succeed with this. Completing steps 3 and 4 may require some additional work/knowledge. In many cases, you can benefit from the input of an outside “consultant” to help you work through the process and make good decisions. This is where a financial planner can add real value.

The Financial Planner’s Role

For those situations where you need some help, your financial planner should come in as a consultant and trusted advisor, to help you make the best decision for you and your family. The financial planner can provide valuable insight, experience and knowledge, helping you with the “why” and “how” parts of many decisions. Your financial planner is there to educate, motivate and guide you toward the life you want to live. As your own CFO you can benefit from your financial planner’s experience and use it to make the most of your money and your life.

While your financial planner is a consultant, they are not the final decision maker. This is where many people make a mistake. They not only delegate help with the decision but they also delegate the decision itself. Remember, as the CFO of your own life, you are in control, not your consultant (financial planner). Consultants only consult, they don’t decide. You need to keep that in mind as you seek out and work with a financial planner, or any other professional for that matter.

Working With Your Planner

Your financial planner should be able to clearly explain the reasoning and the details behind any recommendations they are making. If you don’t understand the explanation, don’t move forward. Get whatever clarification you need before making a decision. It’s your life and it’s your money so you need to understand, and be comfortable with, any decision you make.

One of the ways you can make sure that your financial planner is acting in your best interests is to work with a fiduciary, someone who is legally obligated to act in your best interests at all times. This standard is higher than the typical “reasonable and suitable” level of care that many brokers and product-specific financial types operate under. They ARE NOT obligated to act in your best interests, but rather in the interests of the companies they work for. If you work with a financial advisor or planner that is a fiduciary you eliminate one of the biggest potential areas of concern.

Contact And Connect

If you have any questions about your own situation, or would like an independent second opinion on anything in your financial life, you can set a time for a no obligation call to discuss things further. If my services might be a match for your needs I’ll let you know. If not, I’ll let you know that as well.

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