NEFE has delayed the release of the HSFPP Edition 9 content. Learn more about the anticipated rollout.

Article

Financial Stacking: A Modern American Burden

by Brent Neiser, CFP®, NEFE Senior Director of Strategic Programs and Alliances

This article was originally published in NEFE's Digest September/October 2016 edition.

If you are reading this, you probably already know something about financial prioritization. But put yourself in the shoes of the average American consumer: You are inundated with headlines, commercials, ads and social media posts telling you what you “should” and “must” do to get your finances in order. You are chastised for not saving, warned that you are underfunding your retirement and blamed for not teaching your children about money. It’s enough to leave anyone feeling overwhelmed and paralyzed. Where do you begin to unpack this mental burden?

Unpack Your Financial Stack

Americans have a weight problem (no, not that weight problem). It is the ever-growing stack of financial to-do’s cluttering their minds, triggering their emotions, battling for their attention and eroding their sense of well-being.

Myriad choices, opportunities and expectations generated by the financial services industry, media, advertisements, experts, employers — and even family and friends — create an amassment of jumbled priorities that often leads to inaction, frustration and despair.

At the same time, the way we manage our financial lives has shifted away from paper to the cloud. This transition to a more virtual world has made it harder to get our heads around the various obligations and opportunities we face, especially when information is flowing at us from all directions, both online and in real life.

Without a process to externalize these choices, the constant noise (the flood of emails, the pressure to buy this product, open this account, add to that account, etc.), stack up in a person’s mind, potentially heaping on stress, adding mental weight and causing paralysis. This is the person’s “financial stack.”

It is a vicious cycle, because the more we let the stack build, the more that emotional burden fuels regret over missed opportunities, disappointment over misplaced confidence, and lack of motivation. Just as in the paper days, if we don’t make intentional time to sort, purge and organize our mental financial stack, we easily can be overwhelmed.

Now, more than ever, consumers need to learn how to tune out the noise and analyze, assess and prioritize their financial choices in order to set a realistic road map to their goals. Not only will the financial weight drop off, but financial muscle memory will develop to improve well-being and efficiency. The stack may never vanish completely, but it certainly can be managed.

Tackle the Stack in 5 Steps

Seldom are consumers guided to slow down decision making, or taught how to align their life situation and financial goals with appropriate products and services. Financial planners and coaches can help, but in this era of individual responsibility and information overload, consumers need to develop their own mechanisms for managing their financial stacks and discerning which information is worthy of their attention.

Financial education, especially targeted to goals and decisions that the consumer feels pressured to make right now, can help relieve the burden. Consumers can lighten their financial stacks by seeking out educational opportunities — whether it is taking a class or workshop, reading books or blogs, or exploring trustworthy online resources.

The financial capability field can help by letting consumers know that they are not alone in feeling overwhelmed. Their financial stacks can get lighter and more manageable through focus, prioritization and discernment.

As we manage our financial stacks, the weight of excessive choice and decision lifts. The future seems clearer. Situational awareness grows. Recalibrating and, most importantly, learning and honing financial judgment through experience provides direction and lessens financial fatigue.

Step 1: Weigh and Thin

Determine what is in your current financial stack. Make a list of the financial problems you are trying to solve and the opportunities that will help you address them. Take inventory of your current financial engagements. Gather data on your income, assets, expenses and debts.

Tip: You could make your financial stack more tactile by writing out your current financial challenges and goals on color-coded notecards to get these issues out of your head and into a more manageable model.

Step 2: Sort and Sequence

Start to prioritize the items in your financial stack. Which items could you easily take action on now? Are there any areas where you are especially vulnerable or imbalanced? Where could you focus your attention to have the most positive impact? What is your biggest financial gap or potential missed opportunity?

Tip: Most people will focus first on basics such as reducing spending, paying down debt and building up savings. List the implications and contingencies of taking action (or not) on each item in your stack.

Step 3: Choose and Let Go

Once you choose where to begin in your financial stack, give yourself permission to set aside the other things for the time being. Choose what to focus on first, and then let go of everything else. The financial stack causes so much worry and strain because we feel that we need to take action on all fronts all at once, which just isn’t reasonable.

Tip: Differentiate between short-term and long-term risks. If you are worried about missing a car payment (and potentially losing your car) and also worried about the long-term risk of not having enough saved for retirement, you probably want to focus on the immediate risk and put the long-term risk on the shelf for the moment.

Step 4: Fund and Act

Often financial problems feel insurmountable because we want them to be fixed right away, but that’s just not how it works most of the time. Set meaningful, reasonable and attainable goals, then take small actions toward those goals on a regular basis.

Tip: Even small actions can relieve stress and help your financial stack feel more manageable. In the beginning, your action items might simply be to research opportunities. For example, your first step toward increasing your income might be to research tax credits you are missing out on or ask about skills training at your current employer. Share your goals with a friend to help hold you accountable.

Step 5: Learn and Repeat

Once you make progress on one item in your financial stack, focus on the next financial goal or challenge. Resolve to further educate yourself on a topic that will get you closer to your goals. Seek out a workshop or online course; make an appointment to talk to an unbiased expert.

Tip: Throughout this process, take notes on what works for you and don’t feel that you need to fully resolve an issue in your financial stack before moving on. The important thing is to take enough action on a specific item to reduce your stress for the time being and then to continuously review your priorities. Don’t forget to celebrate when you reach your milestones.