This is a guest blog post originally printed at www.suddenmoney.com and reprinted with permission granted by the Financial Transitionist Institute.
After a handful years of studying life transitions and working with people in the throes of them, we at the Sudden Money® Institute adopted the tagline “Life transitions and good decisions.” That was over a decade ago.
The Sudden Money® Institute (SMI) is now known as the Financial Transitionist® Institute (FTI), and our current tagline is “Transition expertise matters.” The difference? A decade ago we saw that the outcome of a life transition event was profoundly affected by the individual’s decision-making around that event, and we created tools and processes to guide decision-making. And now we know that those tools and processes work.
Managing transitions is tougher than it looks from the outside. Although the money involved is by no means incidental, there is so much going on besides it, and pretty much everything going on affects it in some way. If you want to make the best financial decisions possible during transitions, it makes sense that you should be in the best possible frame of mind to make decisions. That might sound obvious or even silly, but you would be surprised by how little training financial advisors get in the dynamics of decision-making.
When we at FTI talk about how individuals experience their transitions, we often use the terms “flow” and “struggle.” When someone is struggling, their challenges can include difficulties with concentration, readiness, follow-through, and even their sense of their identities. This comes from the reality that sometimes the stress in our lives causes our brain activity to shift away from its (relatively) recently developed center for executive function to accommodate for the threats that appear to be present. All of this translates into difficulty making skillful decisions—decisions that best serve the individual and their vision for the future.
One of the core protocols of Financial Transitions Planning is the “Decision Free Zone,“ which is proactive time out from making nonessential decisions. The DFZ was designed to address the primary, twofold obstacle to the making of skillful decisions: the absence of a system for sorting and prioritizing, combined with the absence of a way of testing out options for viability or even simply out of curiosity. When you are exhausted or you lack of clarity or you are unable to focus or you are overwhelmed with options, you can make any number of regrettable decisions, including ones that cannot be revoked.
Our DFZ begins with listing everything you think you need to do or decide to do, and then organizing all of those items into three time blocks: Now, Soon, and Later. The unburdening effect of this type of sorting and prioritizing cannot be overstated. It creates a shift from overwhelm to calm and from confusion to clarity, sometimes in minutes. As important, it reveals assumptions and incorrect information that can lead to financial, personal, and even legal problems.
Before Elizabeth’s husband died, he ran the day-to-day part of their very successful mortgage business. His death was unexpected and the timing could not have been worse—right at the height of the 2008 financial crisis. The real estate market was crashing, the mortgage business was collapsing, and Elizabeth was in shock. She was faced with huge immediate decisions that would shape the rest of her life: whether to close the business, sell the house, declare bankruptcy, or just curl up into a ball and hide.
Elizabeth had managed the business and family finances, and it wasn’t as if she was in terrible shape financially. But she was beginning to panic, and part of that panic was the impulse to sell everything and run away. Her reasoning was that any consequences would pale in comparison to the way she was feeling once her grief kicked in after the initial shock. Her physical and psychological state was deteriorating, and she couldn’t read financial statements or insurance policies. Every piece of mail felt like it weighed 100 lbs.
Her advisor needed her to see that she was okay and could weather the market crash, all while understanding her stress level and her diminished capabilities. He mapped out what needed to be done immediately and made a list of everything else that would be safe to put off for a few months. He also created a one-page cash flow overview using simple terminology, graphics, and arrows to show her that she was okay and would be okay going forward with or without the business. One year later, the mortgage business is doing well and she intends to run it for at least 10 more years before selling it.
Elizabeth’s advisor was successful in communicating with her because he presented the DFZ and the one-page cash flow chart. He immediately recognized that her state of panic and grief was causing cognitive difficulties and he knew what he needed to do. When Elizabeth saw the clear picture (the one-pager is a set of easy-to-understand, easy-to-remember, and easy-to-recall images) of her real financial position, she realized that her tremendous anxiety was caused by an idea of her finances that was imagined. Once Elizabeth could see she was not in financial ruin, she was able to allow a trusted employee to manage the minimal activities of the business so that she could withdraw into her first cycle of grieving.
Though this might be the hardest transition Elizabeth will experience in her life, she will go through others. The experience of being expertly led through a harrowing time bolsters resilience and gives the client valuable life skills. Transition expertise matters—not just for advisors, but also for clients.
Prepared by Yeldarb. Copyright 2017.