Personal Finance Coaching

In years past, most families would have put "develop healthy financial habits" on the "nice-to-do" list but certainly not on the "must-do" list.

My, what a few bank failures and a tanking economy will do to shift financial priorities.

If only it were that easy -- just a few behavioral tweaks and then everything will be good-to-go. In fact, families and their financial advisers are realizing that learning new ways to relate to money is difficult -- especially now that money is tight for so many. A few recent statistics illustrate my point:
- 75% list money as the No. 1 source of stress in their lives (American Psychological Association).
- One in four Americans are seriously distressed about their financial situation (Thomas Garman, Virginia Tech).
- Credit-card debt per U.S. household averages about $9,000 (Department of the Treasury).

Lately I've been speaking to people about the importance of having a good defense when it comes to your finances. Whether it was a large group of corporate employees, successful entrepreneurs and their families, or attendees at a regional community foundation conference, I've noticed several new themes emerging from the folks in the audience.

People are eager if not anxious in their quest to adapt to this "new normal." Specifically, they're asking for ideas and guidance on rebalancing the family budget, discussing a job loss with a child, setting short-term and long-term money goals, creating spending boundaries for everyone in the family, and keeping a philanthropic focus in an increasingly challenging environment.

In the haze of stock market run-ups and the housing bubble, most adults, regardless of socio-economic status, forgot the personal-finance basics. Now more than ever, investors need guidance and wisdom to help them rebalance their money habits -- not just their retirement portfolio. They need a good coach to help them play defense in an increasingly volatile economic environment, and to focus them on things they can control.

Lack of attention to the fundamentals is a big part of what got us into this mess. So seize the day and navigate the new normal by reconnecting with the basics. Here are three discussion topics that both investors and financial advisers should find valuable:

1. Refocus core money values - Look closely at your past habits to avoid making the same mistakes. Check out a one-page exercise for adults and young people called My Money Plan that you can download for free from the Share Save Spend Web site.
2. Come clean about spending - Use the information from Step One in My Money Plan as a springboard into an honest talk about financial habits. This can be accomplished by doing a 30-day expense-tracking exercise (and yes, credit card charges count). I call this the "Truth Tonic." It will do wonders to help determine where adjustments need to be made to spending behavior.
3. Involve the entire family - A good relationship with money is not just an issue for adults. Children also need help in developing a healthy attitude about financial matters.

Remember, it's always easier to instill healthy money habits in a young child than it is to unravel unhealthy habits in a young adult.

[from Market Watch]