I am a financial planner and I have a confession to make. At the start of my career, I didn’t really have a personal financial plan. Of course, I might have had good intentions and most of the significant aspects of a financial plan were in place, such as a budget, insurance, and investments. But I was missing a written plan to help me stay focused on the things that matter and avoid distractions by things that might derail me.
Granted, I was never really interested in personal finance until my first real job out of college as a clinical counselor in a local hospital. In fact, I remember feeling slightly confused when the Benefits Enrollment Advisor gave us a brief explanation of our 401 (k), 403 (b), and 457 plan options. As a financial educator, I work with hundreds of people every year in similar situations and I empathize completely.
My curiosity led to an information driven desire to read as many personal finance and investing books as possible. Then I took a leap of faith and started investing outside of my employer’s pension plan with a discount brokerage. Suddenly I was “all-in” and completely enamored with the exciting and complex world of investing. Eventually, I found myself more interested in learning more about the investment markets than pursuing my doctoral studies in psychology.
Thinking back to the tech bubble of the 90s, I realize that I was not alone. Countless other investors were caught in the dot-com bubble as well. Online trading made it easier to trade stocks, and people were apparently throwing money at any growth stock or IPO, regardless of the fundamentals of the business. Initially, I spent too much time and energy choosing the right stocks and getting the best possible return on the investments. Very little time was spent on important things such as the life goals I wanted to achieve.
It was then that I realized my first financial plan for the most stubborn and demanding client I have ever worked with – yours. What triggered my own desire to come true with an honest financial life plan? The combination of high interest credit card debt, student loans, and the occasional financial argument during the early years of marriage was the wake-up call I needed.
But it can be difficult to fit our goals and values into a real financial action plan that responds to where we are in life. Traditional approaches used by financial advisers only scratch the surface of identifying meaningful and focused goals. George Kinder, often referred to as the pioneer of life financial planning, highlighted three essential questions in his books and training sessions designed to place our core life values at the heart of the entire financial planning process. . If you’re struggling to stick to your financial plan, or just need help prioritizing your goals, take some time to think about these important questions:
1. Imagine that you are financially secure, that you have enough money to support yourself, now and in the future. How would you live your life? Would you change something? Now is the time to let go and try not to hold back your dreams. The aim here is to describe an authentic life that is entirely yours and unhindered by financial barriers or other obstacles.
Think carefully about how you live your life with financial security today and tomorrow. This artificial dream world of contentment essentially asks how you would live your life if money weren’t an issue. The first question helps us think about all the possibilities in life.
2. Now imagine that you visit your doctor, who tells you that you only have 5 to 10 years to live. You will never feel sick, but you will not be notified when you die. What will you do in the time you have left? Will you change your life and how will you do it? (Please note that this question does not assume unlimited financial resources.)
Things get real with this one. Dealing with our own mortality is not a comfort zone for most of us. But your answer here will probably start to focus on your core values. This is where those bucket list items come into the discussion and we usually focus on the friends, family, and relationships that matter most to us. This question sets the stage for our own self-exploration of life’s priorities.
3. Finally, imagine your doctor shocking you by telling you that you only have 24 hours to live. Notice the thoughts or feelings that arise when you face your very real mortality. Ask yourself:
What did you miss? Who haven’t you become? What haven’t you done Who would you like to spend more time with? Do you have any regrets?
By this point, you will probably have discovered or confirmed the things that motivate you. This third set of questions can be difficult if you have recently experienced the loss of a loved one. This hypothetical scenario is more about life than death. Based on your answers here, you can refocus your priorities. Most importantly, you should use it as a guide when creating a living financial plan that is unique to your life.
When you follow the progress of these questions, you see the difference between possibilities, priorities, and regrets. I personally asked myself these same questions during my transition to the profession of financial planner. I have used them in financial coaching sessions over the years and find them a useful tool for creating more focused financial plans.
Financial planning for life encourages smart financial decision making. Taking a more integrated approach to wealth and money management adds meaning to the whole process. Otherwise, the pursuit of “financial freedom”, whatever that term means to you, could end up being an unsuccessful endeavor.