The Personal Financial Blood Test Comments
I’ve recently gone through quite a bit of ’spreadsheet-work’ with clients who engaged me to give them a report on how well they are doing financially. After crunching the numbers, I summarized these findings into a report which allows them to easily understand what is really going on with their money. In most cases, they are quite surprised, if not shocked.
This is when I realized another thing about doing these sort of soul-searching exercises with clients- they don’t seem to like crunching these numbers themselves. To most of them, it felt like getting a blood test where they are not sure about the outcome. Some of us even hesitate to go under the needle, for fear of finding out the truth.
In short, denial is bliss. It’s better to get busy and let the finances take care of itself. “Hey, I am still able to put food on the table, so why worry?”
Unfortunately, by putting your finances on ‘auto-pilot’ mode, you might be living in an illusion of wealth, while your debts pile up mysteriously off the radar.
If you cannot perform your own Personal Financial (PF) Blood Test, then it’s probably a good idea to get someone whom you can trust to do it for you. Just think of it as outsourcing your accounting chores, only difference is this is much more personal.
If you are running the family’s finance department, it’s a good idea to also get your spouse to sit through the planning process together. This is also a good way to nourish a good and trusting relationship.
However, in most cases, one of the spouse would usually claim to be ‘financial-illiterate’, resulting in only one person fully responsible for the family’s financial well-being. I would discourage such arrangement because the family’s economy plays a very crucial role in the stability of a family.
Let’s look at this scenario:
Mr Wong who was the sole breadwinner was killed in a road accident. He left behind a young wife and 3 school-going kids. While he was still alive, he was the ‘finance minister’ of his little household. Unfortunately, he did not share with his wife about how he manages the household’s finance because his wife was not interested with anything related to numbers and money.
And to top it off, Mr Wong also left behind RM1 million worth of insurance payouts and distributed all his assets to his wife in his will. Close relatives and friends who heard about the ‘fortune’ Mdm Wong inherited started appearing and gave her ideas on how to make use of the money.
Before Mdm Wong realize what has happened, all the money that was left by Mr Wong to keep the family going was depleted due to the ‘investments’ recommended by these opportunistic family members and friends.
In fact, your PF blood test should be done as regularly as once a month which is why you should have an easy to update procedure when consolidating your incomes and expenditures. A simple spreadsheet that extracts the data from your banking accounts is usually sufficient. Next, you need to categorize your transactions to help you reveal your spending trends and uncover any ’suspicious’ transactions that you might have made.
A regular PF blood test would allow you to plan ahead. You will know in advance if you are in for a tough time or if you will have enough surplus to invest in the stock market.
Don’t wait until you are struck with a paralyzing stroke. As I’ve mentioned earlier, if you don’t have the courage to crunch the numbers and face the truth yourself, seek assistance from someone whom you can trust. Pay them a little administrative fee if you have to ;-)
For those with lots of debts in their ‘blood flow’, sorting out your finances can be a very mentally discouraging exercise. This could be one reason why you are so deep in debt in the first place. Yes, striking the lottery might ease the pain for a while, but to really prevent yourself from suffering financial scars and bruises, your better bet is to go straight to the root of the problem.
Use the information you get from these blood test results to make adjustments. See where you can trim, reduce or totally eliminate from your spending column. Next, look at how you can increase your income with the resources available to you. Then, see what you can do with the extra money that you manage to salvage after paying off all the bills and loans.
Be in control of your own financial health!
