March 4, 2009

Financial health: What does Lent have to do with it?

By Jonathan Anderson

Amidst the current financial crisis in which many seem hopeless, let us use this Lenten season, this new springtime, to renew ourselves, get our financial life in order, and put money in its proper place in our lives.

We are experiencing unprecedented times, not only in the U.S economy but the world economy as a whole. It seems that banks and financial institutions are failing weekly, the stock market is crashing daily, and unemployment is growing by the minute. It appears as though there is little hope for a quick, overall economic recovery, let alone our own individual financial health.

To make things worse, the current situation was difficult to anticipate. Just before this downturn we were all living in one of the greatest boom periods in American history. The stock market was up, home prices were steadily rising, banks were healthy, pension plans were strong, and your overall financial health was probably very hopeful.

Then the unexpected happened. Mortgages defaulted by the thousands, forcing some of the world’s largest companies to file for bankruptcy protection or to be bought out—then the stock market tumbled.

Today, someone who was recently in a good financial situation can be in turmoil, despair and shame because their 401(k) lost 40 percent of its value, or because they lost their job.

These are events that make a huge difference in our lives. We can feel that someone has failed us or that we have failed ourselves. We think: “I could have invested better” or “I could have worked harder” or even “This should have all been prevented by someone.” Maybe those statements are partially true. But we could not have controlled the economy and we could not have known what was going to happen. Therefore, instead of thinking, “I need this economy to turn around so I won’t worry about money so much,” we need to concentrate on,  “How do I change my outlook on money, how do I put money in its proper place so I can focus on spending my time on what is truly important in my life?”

It’s not that money is not important and useful. It is. But we must be careful to make sure money is used as a means and is not an end in itself. If money had not been the center of our lives before this economic downturn, would it have affected our happiness so much? Probably not.

This is the perfect time of year to change things. Lent is upon us and we can open ourselves to the gifts of this season to be repentant of our past mistakes and to be renewed. Let’s change the things we can control, and turn our focus to what’s really important. Let’s think back to the mistaken importance money held in our lives and how we can put it in its proper place. This does not mean focusing all of our time on our finances so that life will be better. Beware of this temptation. What it does mean is organizing our financial life so that we can really focus on what’s most important.

How to start
Initially, getting your financial life in order might require a bit of work. You can go about it yourself or employ the help of a trusted professional (a professional may cost a few dollars, but you will be surprised at the value and help they can provide). If you do choose to go at it yourself, make sure you educate yourself. There are several good, viable books to reference in this area.

Either way you choose, there are four main areas you want to focus on: cash reserves, debt management, insurance, and growth assets (stocks, bonds, IRAs, 401(k)s, etc.). Within these four main areas there are three questions you want to answer: “Where am I now?” “Where do I want or need to be?” and “How am I going to get there?” For example: “I am now $20,000 in debt. I want to be debt free and I need to prepare and implement a plan of debt reduction or consult a debt specialist.”

Assess whether the answer to the “How” question is actually reasonable. If it is not then you must reassess things. The idea is to organize your financial life so that you can focus on what’s really important. Take everything one step at a time and try not to get overwhelmed by all you might have to do in the beginning. Remember, it took a while to get you into your current financial situation and it might take a little while to re-organize it all. Don’t worry too much about how you or the economy got into this situation—we can’t control this. We can only change where we are today and move forward.

Sit down with a piece of paper and map out your plan of action. It will help you stay motivated and keep you on the path to the where you want to be. Take the time and stay motivated; it will be well worth it. Through this whole process remember why you are doing it and spend time with those you are doing it for: God, family, friends, and all others who may need a little help.

This Lent let us be reminded what the season is for: purification, renewal and hope. Just as Christ was resurrected and a new spring was born—the new dawn of creation—so too we can rise out of this financial crisis with a new outlook on what is really important.

Jonathan Anderson is a financial advisor with Colorado Financial Partners. The opinions voiced in this column are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.