Investing

5 Ways To Get Honest About Your Finances

If, like me, you just learned that April 30 is National Honesty Day, welcome to that news. TBH, it’s pretty fitting since the first day of the month is dedicated to pranks, lies, and “just joking” antics. Anyone who has lived longer than a day can tell you that it’s not easy to be honest 24/7, but there are still some things that require honesty if they are going to thrive. Take, for instance, our finances. The past few months alone have given us more than enough to chew on regarding money, the future, the unforeseen, and the unexpected. But if we’ve put ourselves on autopilot (or stayed there) regarding saving up for the future or for those things we want to prioritize, we need to snap out of it, and we need to be honest about where we are. 

The positive news is that an honest approach to finances doesn’t have to be an exercise in pain and frustration. According to Jason Gordo, vice president of Goldman Sachs Personal Financial Management, it can be an informative journey where you learn about where you are coming from and visualize your way forward. Gordo has clocked plenty of hours ushering clients toward more financially honest living. He walked me through their program, which helps users define their money mindset (called MoneyMind) and then guides them through the necessary and frank conversations (called HonestConversations) that help to shape a better financial picture. 

While talking and thinking honestly about my own money isn’t my fave, the process was painless and it revealed a lot in a short time. Here is a brief peek at five things I learned along the way.

1. Be honest about your money mindset. 

Per the quiz, there are three types of mindsets: Protection, Commitment, and Happiness. Most of us don’t usually favor one particular mindset 100 percent. Rather, we are a mix of them, scoring somewhere within each one. The basics go like this. 

Team Protection: do you prioritize saving and investing over all else? Protection money types sometimes accumulate large sums of money over their lifetimes even though they might not mean to. They also tend to have this extreme fear of running out of money before they run out of life. 

Team Happiness: are you living for today and enjoyment right this minute?  Happiness money types prioritize the moment and spending their money while they can rather than saving up for the distant future that may or may not come.

Team commitment: are there causes and people you deeply care about? Commitment money types see money as the source they tap into and spend or invest on the people and causes that matter to them because it brings them great joy.

2. Be honest about what you want. 

Often, a crucial step toward honesty is to get clarity around what you want. To properly do this, it’s essential to be honest about how money makes you feel. Thinking about this will help you understand what you want your life to look and be like and how your money or resources can assist you in living the life you want. Assessing things like essentials in your life or how you want your life to look is part of the work you get to do. And, it’s ok to dream big, think small, or even be uncertain and revisit as needed. Just don’t forget to plan for whatever life might throw at you. “You want to make sure that you’re prepared for surprises that will come along the way, like pandemics, layoffs, and other events in the economy or the stock market,” he says.

3. Be honest about your past. 

We all form some of our money habits at a young age. Whether we overheard family war stories about lean years or everything was taken care of initially, and we never had to think about how much something costs, we internalized these lessons. In turn, the lessons learned shaped our money foundations. For instance, if you are fearful about investing or avoid looking at your financial picture, Gordo says it’s time to ask what you are afraid of or why you’re not looking. Asking difficult questions and facing gaps in your understanding about money is part of the work that helps to get you into financial shape, which is a lot like going to the gym, he says. “I know when I go to the gym, I feel better off, I eat better, and mentally, I’m better at work,” says Gordo. “[With] finances, when I know clearly what I want my life to look and be like and how I would love for that life to unfold, then looking at the money isn’t so scary, right? Money is just a tool.” 

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4. Be honest with your significant other. 

Regarding couples, Gordo says, they often balance one another out as there is often an interested party and a disinterested party. But if one person facing their money music is rough going, what does it look like with a spouse or partner in the mix? Our predisposed money minds often creep into our money decisions, and these issues need to be addressed and dealt with. To make the conversation flow, both parties share what’s important and meaningful to them and what they want in life, which often brings surprises, according to Gordo. “[In the conversation] we hear six or seven interesting things from [each spouse] that are important, and there will be one or two things that the partner or spouse hasn’t heard about and vice versa.” This frank discussion helps the pair understand one other’s money mindsets and craft their way forward together and on the same page. 

5. Be honest about what’s not rosy. 

Sometimes, during an honest financial conversation, we discover that the truth just hurts. Maybe we missed out on saving or can’t achieve our ultimate goals based on our economic realities. Gordo says that all is not lost, and this is not the time to be discouraged. While it’s a setback, this hiccup provides the perfect opportunity to assess further what is genuinely wanted and adjust accordingly. “You’ll just have to make different decisions,” he says. These decisions include “adjusting and monitoring the plan as life unfolds based on what you said you wanted your life to look and be like.”  

Ready to start up an honest conversation about finances? You can take the MoneyMind quiz here.

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