of Approach finance from both sides for the best results.
Most of us are familiar with the exterior world of finances – tax returns,statements, retirement planning and such. But there is an interior world of finance as well that is just as important.
The model of exterior finance and interior finance I have pulled from the book Facilitating Financial Health by Klontz, Kahler, and Klontz. This model has given me a great way to explain what I do.
Exterior finance is the “real world” of money – the world of tax returns, bank statements, and retirement accounts. You can split the world of exterior finance into thirds – past, present, and future.
Exterior finance in the past is the domain of the CPA. An accountant's primary concern is getting everything reconciled and reported to the IRS so that you can pay your taxes and be a good, upstanding citizen. While your accountant may have some thoughts about how you are handling your money, she will likely keep those to herself and focus on getting your taxes filed. While accountants may stray into other areas of finance, such as the exterior future if you come back later in the year for a tax planning meeting, primarily the exterior past is the accountant's arena.
The exterior future is the realm of financial advisors and especially financial planners. A planner's main job is to capture the vision you have for your financial future and to advocate for your future self to your present self when your present self starts to mess things up for your future self. Long term goals like retirement and paying for kids college often are a risk of being traded for pleasure in the present – vacations and toys and such. If you have enough money to do it all, fantastic. If not, it is your planner's job to remind you of what you said you wanted.
That doesn't mean a planner won't venture into the exterior present. Keeping track of your progress toward your goals helps them update and modify plans as life circumstances change. And a financial planner may be able to earn her fee back to you by letting you know about a great tax credit or other strategy in the short term.
Financial planners may move into the interior world as well. The degree to which they do so is often a product of their training, their personality, and their level of comfort with behavioral finance and emotions. But even the most spreadsheety of planners will often start their engagement in the interior future by asking about your dreams for the future.
The interior world has more to do with what's going on inside your head – stuff that you may not even be consciously aware of. It's easy to say that what is happening in your head doesn't matter or shouldn't matter, but I truly believe Brooke Castillo has it exactly right. Your thoughts create your feelings. Your feelings drive your actions. Your actions lead to your results. If you don't have your thoughts right, you'll get in your own way over and over again.
The interior past is the primary world of the financial therapist. By exploring what you learned about money as a kid, you'll uncover hidden beliefs and stories you'd forgotten that related to how and what you were taught about money. While I'm not a therapist and don't feel qualified to spend all my time in the interior past (and definitely refer out if childhood trauma is uncovered), I think exploring the interior past is one of the most important things we can do to improve our relationships to money. While you can certainly do this work yourself through journaling, it can be helpful to have a facilitator to draw the information out of you and to help you see how those beliefs may have created patterns in your life. That's exactly what I do in my Money Mindset session.
As you begin to uncover and shift the limiting beliefs and negative money scripts from your childhood you'll begin to live life with more clarity and awareness. You'll start to be able to make choices based on who you are now and what you believe now rather than what you picked up as a kid and lived by subconsciously. This is the world of the interior present. Both financial coaches and financial therapists spend time in the interior present with clients.
One of the biggest things you can do to be more present in the present (see what I did there?) is to meditate. Meditation is just the act of being here now. Not using our minds to relive the past or to imagine the future, but just being still and aware and moving more into observer mode. I have yet to develop a consistent meditation practice so I am not an expert here, but I can tell you that meditation is nothing to be freaked out by. It is basically exercise for your brain. The practice of focusing and being present has been shown to have huge benefits for your brain. I can tell you from personal experience that even though I'm not super consistent, even the little bit of meditation I have done makes a positive difference.
Some financial coaches start with clients in the interior future. “Tell me what buying a house would do for you? What would it do for your family?” By having a good idea of the clients dreams and desires, they can help use that emotion to energize clients toward their goals. While you might talk to both a financial planner and a financial coach about your dream of retirement, the planner will more typically respond with what it will take from a numbers side to get you there, and the financial coach is more likely to help you really paint the picture for yourself and feel the emotion of that dream to help you stay motivated.
What I've given you are rough outlines – what is more typical. Certainly each of these professionals may draw from different techniques and disciplines to work with clients, and each has their own preferred style. So while there are no hard boundaries, hopefully you now have a better understanding of where to start. Are you looking for more interior work – help in sticking to your plans? Or are you needing more the hard numbers side of exterior work?
Regardless of where you are today, I hope you will talk more about your finances, even if it's just with a friend or a significant other. If we can normalize the money conversation it will be easier for us to get the information and support we need to demystify this area of life.
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