Losing money is never easy – it’s even harder when you must consciously decide whether to lose money because your investment hasn’t performed as you’d hoped or planned. This is why it’s critical to have an exit strategy planned BEFORE entering into any sort of investment or financial transaction. However, if you haven’t, you’ll likely need to make some choices at a time when you might be facing a loss or hefty fee as in the case of dropped values of investments in volatile markets, or locked-in loans when your situation has changed. To alleviate some of the emotion to make a business decision about the best action to take, it’s important to step back and look at your original intentions and apply a systematic, calculated analysis on the money in question.

How? First, remember that your goal with any investing is to eventually convert savings to income so that when this happens, it’s a smaller number (i.e. $100k might be down $10k; the income on the $90k is still likely in line with your expectations). Likewise, if a fee to refinance or pay down a locked-in loan is $10k, you will have to calculate the long-term costs of doing, versus not doing, the refinance. A financial calculator is an invaluable tool for this purpose. Second, review your original risk tolerance on your investment that’s dropped in value. If the percentage of loss stated was a worst case comfort level (and has been met), then a sell decision was already made – you just may not have considered that given the current market value of your investment. And, if your original loss comfort level has not yet been reached, then you can relax and watch knowing that if the situation worsens, you might need to realize a real loss. And third, when planning your exit strategy in a volatile market, it’s best done while considering your entire portfolio and individual investments. For example, if an investment has dropped in value by 20%, but your entire portfolio is only down by 3%, then you’re in a better position to hold on to the investment that has the large loss because it’s not creating a significant impact overall.

Can you still manage your money even if you’re not that interested in ‘money stuff’?

Staying in control of your investments and your financial planning does not require you to become an expert on all the technical aspects; it requires you to know what your responsibilities are and how you will fulfill them.  For example, if you are investing in stocks, bonds or mutual funds, you will be in more control if you have read the investor material presented to you, written your letter of understanding, know your exit plan, and know how, where, and what to look for when monitoring the investments.

Why?  Even the most knowledgeable advisors with the most experience are still not living your life.  You are ultimately responsible for each financial decision you make so learn from the experienced advisors what your responsibilities are, and what you need to know, and what you need to do to stay in control.

This seems to be the week for dealing with financial stress. Likely because the third week of January is when many people have fully settled back into a routine after the Christmas holidays and… the shopping bills arrive in the mail. The credit card statements and December bills are in the mailbox and due now. That will force a good hard look at the current state of affairs, regardless of whether it’s additional debt from December shopping and entertainment. Or, perhaps it’s just regular bills that are due – that on top of the Christmas expenses seem to put a drag on the bank account. Or, maybe you didn’t put the same attention you would have normally towards your business or your investments and now you are looking at the results from last month and not impressed.

Whatever the reason, the best place to start is at step one: where you are, then get clear on where you want to be, and grab a pen and paper and start documenting exactly where you are. Get the current reality in writing so you have the details to take to a professional to help fill in the gap between where you are and where you want to be.

Something that will hold you back and can create unexpected risk is excess clutter in your life.  This clutter can be stuff, paper, activities, or even people.  It’s anything that blocks the calm space you need to address changing financial issues.  You must have the time, energy and space to work, learn, manage and grow. If this is your situation, you first need to acknowledge the obstacle and risk it creates, then handle one decision at a time until you have the surroundings that support you in your financial growth. If this doesn’t seem significant, ask yourself whether the clutter, the negative people, or the activities exist in your vision of your ideal life.  And, what is the cost of the clutter?  What will it cost you if you lose an important financial paper during a tax audit, for example? Likely your ideal lifestyle is not cluttered with papers and stuff and negative people – therefore, this needs to be cleared up before you can move ahead.

How? Start with a list of all the areas where clutter is bothering you, and then list all the stuff.  After you have a list, you start to prioritize rooms, areas, and sections in your home and your life.  Then make a plan, set some dates, book some time and follow through.

If you have an idea for business, but still need to pay your current expenses, there are two types of obstacles:  time to work on your business, and money.  If you had the money to pay your current expenses, then you would have more time to work on your business.  There are two ways you can get that money:  work longer and harder at your current work to fund your business, or go out and get the money you need for your business idea.

How do you know where to start looking for the extra money needed?  Start asking.  If you don’t know how much money you need, then start asking for help putting a business plan together so you know how much money you need and how it can be used for your business as well as how it can be paid back to wherever you get the initial funds from. Keep asking until you find answers and money to do what you need to do with the time you have available.

Bank accounts, savings and investments need to have specific functions.  For example, an account for holiday spending is best kept separate from savings for a rainy day.  Likewise, saving for larger purchases or treats can be done with cash in a nice jar at home, rather than lumped together with the holiday money.  And, a jar of loose change is not as inspiring as a jar of $10 bills that is designated for family meals in a restaurant.

Why? Money can become like clutter if it’s left lying around or tossed in a jar.  The smaller amounts of change are still real currency and need to be treated respectfully.  You can keep all your smaller change together then have a young person roll it and keep the money, or you can dedicate a particular type of coin or bill to be used for a specific purpose – perhaps for something you wouldn’t normally spend money on or feel guilty about spending.  A great example is the often-abused café latte.  What if you saved your nickels and dimes for that purpose?  It’s not hard to imagine handing over $3.50 made up of thirty dimes and ten nickels and sitting back to enjoy guilt-free coffee that didn’t create a money mess down the road.

If you think you don’t have money to save because your current cash flow is tight, you can still develop the habit of saving and giving first.  When any money comes in, immediately set aside 10% into a savings account for you.  If you are short at the end of the month, you can transfer the required money out of your savings.  If you consistently develop this habit, you will find that over time you will not require the full amount of the money transferred into savings and it will begin to accumulate.  This is the concept of pay yourself first.  You did and you needed the money so you used it.  You need to start small to develop the habits that will produce big results over time.

When do you start this process? Don’t wait until you have money.  Don’t wait until you have the appropriate accounts set up or until something has happened.  Start now and start young.  This is a perfect skill to implement with children as soon as they are old enough to understand that money has value.  For many kids, this is at about age 4 or 5.  They don’t need to know the different values just that it has some value. They will learn that when money comes in, you put some into different places for different things – simple.