Money has a subtle way of permeating many facets of our lives. Daily bills and expenses, endless offers for new monthly subscription services, car bills, pay raises and layoffs, birthday card money, and other financial surprises — both good and bad — along the way. Then there are the bigger picture items, which tend to require more planning and consideration: buying a first home, navigating career changes, retirement planning, and crafting a will for loved ones that’s fair and straightforward. 

As a financial planner I get to meet a wide variety of people with very different financial situations, diverse hopes and dreams, and attitudes toward money and planning that range from excitement and curiosity to downright aversion, avoidance and denial. I wouldn’t go as far as Socrates, who is reported to have said “the unexamined life is not worth living,” but I would say there is tremendous value in taking a close, honest look at our own financial state of affairs. Time and again, I see it  produce deeply meaningful benefits and help people avoid some serious pitfalls. 

The examined life

When people are wondering about how to examine their own financial state of affairs, a tool I sometimes point them to is the Hierarchy of Financial Needs developed by the New York Life Insurance Company. Making loose reference to Maslow’s hierarchy of needs, it shows a pyramid structure with different stages of financial needs, from having enough cash flow to cover basics like food and housing as the first stage, to lifestyle goals and legacy planning once a person achieves more financial stability and some measure of wealth. While not a perfect or exhaustive framework — or a universal goal we all should be chasing — it gives some benchmarks to help get a clearer picture of where a person or family is financially. We can gauge whether there may be some areas we would like to grow in, or be reassured that we have our affairs mostly in order.
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The invitation to take a clear snapshot of one’s financial situation evokes very different responses in people. Some have an excel document with everything detailed: income and expenses, assets and liabilities, financial goals and dreams, who to contact in case of an emergency. Others may have a stack of unopened investment statements and aren’t as clear how much they have, where exactly it all is or whether their income is exactly covering their expenses. Some are eager to dive right into financial details and options, and for others this sounds as exciting as a long, expensive trip to the dentist. 

The differences could have a lot to do with the set of beliefs, experiences and understandings about money that each of us brings into adulthood. They can also be attributed to personality, general likes and dislikes for the topic of finances, and perhaps the sheer busyness felt by many people. The fact that well over 50% of North American adults do not have a will suggests there is significant room for a good many people to take a deeper dive into their financial well-being for their own sake, and the sake of their loved ones.

Getting honest about money

Alongside politics and sex, money remains one of those taboo subjects in many circles. Even among family and good friends there can be reluctance to speak openly about how much we are making, how much debt we’re carrying, what certain things cost us, and how we generally spend our money. Often this reluctance is warranted — there are all sorts of subtle and not-so-subtle ways people evaluate each other based on their financial choices and relative financial situation. 

A therapist I know often says, “let’s start with the facts.” This is a good starting place when we’re considering taking an honest look at our financial situation. Do I have a clear picture of my income and expenses?

A therapist I know often says, “let’s start with the facts.” This is a good starting place when we’re considering taking an honest look at our financial situation. Do I have a clear picture of my income and expenses? If so, what are they? Do I have financial reserves? How much and how long would they last? What would I do in a financial emergency? Do I have a will? Have I talked to my loved ones about the will? Do I have a clear, written succession plan if I happen to own a business? Many of these are yes/no questions or have quantifiable answers. 

A clear financial picture does not actually change any of the facts, though it can give rise to some potentially unwanted emotions if we don’t like what we see.

Beyond facts

A clear financial picture does not actually change any of the facts, though it can give rise to some potentially unwanted emotions if we don’t like what we see. This, of course, is why a lot of people stop short. So, in addition to looking at the facts, it is important to look at feelings and emotions that arise for us in the face of looking at our finances. For some, the whole exercise of looking at their financial situation can cause shame and embarrassment if they aren’t where they think they should be, or perhaps they haven’t done things they feel they ought to have. Others feel panic and worry that they haven’t saved enough, or retirement is looming and they aren’t prepared. Or maybe they are okay, but they worry about their kids. There can also be a range of positive feelings such as the comfort of financial safety and security, the gratification of being generous to others, satisfaction from hitting certain goals, and the excitement about using money to do meaningful things.  

How we relate to money shapes so much of our lives—our choices, our stress levels, even how we connect with others. It's not just about the numbers, it's about understanding the story we tell ourselves about money and the role that plays in our wellbeing.

How we are doing financially is about the facts, yes, but I think the examined life invites us to go deeper. It invites us to step back and consider how we view money, how we think about it, the feelings we have about it, and how it may be affecting our relationships. How we relate to money shapes so much of our lives—our choices, our stress levels, even how we connect with others. It's not just about the numbers, it's about understanding the story we tell ourselves about money and the role that plays in our wellbeing.

Knowing where you stand & where you want to go

Even if we don’t have a specific goal in mind, taking a step back to look at both the facts and the reality beyond the facts can be incredibly valuable — it helps us understand where we stand and why. It can ground us in our current reality, opening up our options for the future. 

And if we do have a clear financial goal or dream, knowing where we’re starting from — financially, mentally and emotionally — makes it so much easier to chart the best course forward, anticipate challenges and set us up for success. 

In either case, reflecting on our financial situation and our mindset around money helps us gain clarity, insight and a greater sense of control. And after we’ve had a good honest look, what do we do with what we find? That’s another question worth exploring.