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Proactive Financial Management: Why Does It Matter?

Most people can agree with the vast difference in meaning between the words proactive and reactive. While they may have various contextual meanings, for the sake of this article, I’d like to focus on actionable outcomes as they relate to the meanings of these two words, and why you should be relating them to your financial well-being and financial stability. Proactive financial management focuses on controlling and preventing unnecessarily stressful situations rather than responding to them once they’ve already happened.

Procrastination Leads to Reactive Behavior Financially

All too often, it can be easy to procrastinate many of our ‘mundane’ financial tasks. Whether that be simply balancing the good-ole checkbook, or finally getting that amendment to an old living trust executed.

While these are things we know need to happen, they tend to sit in the back of our minds until there is a threat that could arise from not completing them (i.e. overdrawing an account, or risking probate, in these examples).

Unfortunately, there is no common cure for procrastination. But what about the things we are not currently aware of as threats or issues?

Many issues arise in one’s finances from a simple lack of awareness or a lack of identification. We cannot prevent problems from arising if we aren’t aware of their existence…

Or can we?

Proactive Vs. Reactive Comparison in Managing Personal Finances

I’d say that we can all agree that most people prefer to prevent problems rather than have to solve them once they’ve materialized.

This is where the comparison between proactive and reactive really becomes recognizable, especially in relation to your personal financial stability and well-being. If you could prevent a tax increase from materializing by implementing a strategy today, or before you pass away, wouldn’t it make sense to explore those possibilities? If you could prevent potential losses in your investment portfolio by reallocating today, rather than after a market correction, wouldn’t you want to consider the options?

Strategic life financial planning can help you proactively prevent issues rather than reactively responding to issues when they occur when it might be too late.

Getting Proactive Financial Management Advice

Whether you are guiding yourself through your financial needs and plans, or you’re getting advice and financial wellness tips from someone else, how is that advice received?

Are you actively pursuing things that lead to preventing problems, or are you constantly waiting and reacting to see what happens, and then making changes accordingly?

As comprehensive Certified Financial Planners, we are major proponents of planning proactively and believe that if you’re getting reactive financial advice (or none at all), you’re simply waiting for problems arise.

Why Proactive Personal Financial Management Matters

You may want to look at the way your current personal financial plan is being managed and ask, “Do I want to prevent problems from happening, or try to fix them as they come along?”

If you find yourself constantly having to fix issues, or are afraid there may be issues you are unaware of looming in your future, you may want to consider talking to someone who advises proactively –not just reactively.

Reach out to a Financial Planner at Chatterton & Associates to learn how to start proactively planning in your financial life today!

Check the background of this firm/advisor on FINRA’s BrokerCheck.