Episode 114: Why People Avoid Financial Planning

Transcript

Hello and welcome to the balanced wealth podcast. My name is Gavin DiStasi and today, we’re gonna talk a bit about what causes so many folks to avoid engaging in financial planning.

You see, there’s a strange paradox when it comes to financial planning.

Most people would agree that having a financial plan is probably a good idea. We know we should save for retirement. We know we should have an emergency fund. We know we should understand our investments, make sure we have the right insurance, update our estate plan, and generally have some idea of where our financial lives are headed.

And yet, a surprising number of people simply… don’t do it. Not because they don’t care about their finances. On the contrary, often, it’s precisely because they care so much.

Money is one of those subjects that can generate an enormous amount of emotion. Fear. Embarrassment. Guilt. Confusion. Even shame. And when something makes us uncomfortable, one of the most natural human responses is avoidance.

Think about something as simple as opening a credit card statement after an expensive month. You already have a pretty good idea of what you’re going to see. And yet there can be this little moment where you think, “Maybe I’ll look at that tomorrow.” And of course, not opening the statement isn’t gonna change the balance, but for another 24 hours, you don’t have to confront it.

Financial planning can work the same way, just on a much larger scale. Maybe someone is 52 years old and has never really calculated how much they’ll need for retirement. Somewhere in the back of their mind is the question: “Am I behind?” And that question can feel threatening, because what happens if the answer is yes?

Now you might have to make changes. You might have to save more. Work longer. Spend less. Or acknowledge that some of the assumptions you’ve been making for years may not be realistic. So instead of finding out, you avoid the calculation altogether.

Psychologists sometimes refer to this as the “ostrich effect”—our tendency to avoid information that we worry will make us feel bad, and money provides plenty of opportunities for that.

But avoidance doesn’t only happen when people are struggling financially. I’ve seen people with significant assets who still resist financial planning. Sometimes they’ve accumulated investments in half a dozen different accounts and aren’t entirely sure what they own. Sometimes they’ve built a successful business but have never created an estate plan. Sometimes they’re approaching retirement with substantial savings but have never actually asked the question: “How much can I comfortably spend?”

In those situations, the anxiety may not be about scarcity, it may simply be about uncertainty, and uncertainty can be surprisingly uncomfortable.

There’s another emotion that often enters the picture: shame. Money is deeply connected to our sense of competence. People may feel embarrassed that they don’t really understand investing, or that they waited too long to start saving. Or that they earn a good income but somehow haven’t accumulated as much as they think they should have.

And because personal finance is rarely discussed openly, we tend to compare ourselves with an imaginary version of everyone else. We assume other people have figured it out, but the truth is they probably haven’t.

The neighbor with the beautiful house might have a huge mortgage. The friend who seems financially sophisticated may have no estate plan. The colleague who talks confidently about the stock market and all his great stock picks never tells you about the ones that he lost his shirt on, and more importantly, he may have no idea whether he’s actually on track for retirement.

Financial lives are messy because human lives are messy. And that’s an important point, because one of the biggest misconceptions about financial planning is that you’re supposed to get your finances organized before you meet with a financial planner.

And don’t tell my wife, but to me, that’s a little like cleaning your house before the housekeeper arrives, which I’ve never quite understood, because the mess is the reason you’re asking for help.

Similarly, a good financial planning process shouldn’t begin with judgment, it should begin with questions. What matters to you? What are you worried about? What do you want your life to look like five years from now? Ten years from now? What would make you feel financially secure?

From there, you can start turning something emotional and abstract into something concrete. And that may be the greatest benefit of financial planning. It helps replace uncertainty with information. And yes, sometimes that information reveals a problem. Maybe you do need to save more. Maybe retirement needs to happen a little later than you hoped. But very often, people discover something else entirely.

They discover that they’re actually doing better than they thought. They realize they can afford to retire. They can help their children. They can take the vacation they’ve been dreaming of. They can spend a little more without jeopardizing their future.

For years, they’ve been carrying around this vague financial anxiety without ever testing whether it was justified, and once the numbers are on the table, the anxiety often becomes much more manageable.

So if you’ve been avoiding financial planning, you might ask yourself a different question. Instead of asking, “Why haven’t I gotten my financial life together?” Instead ask: “What am I afraid I’m going to find out?” because that question may tell you far more.

At the end of the day, financial planning isn’t really about creating a perfect spreadsheet or predicting exactly what the stock market will do. It’s about being willing to look, in order to understand where you are today, decide where you want to go, and make thoughtful adjustments along the way.

The goal isn’t perfection… it’s clarity.

And sometimes the hardest part of financial planning isn’t building the plan.

It’s simply deciding that you’re ready to open the envelope.