It’s not all that uncommon for people to go through life without ever stopping to consider exactly what kind of life they want to be living—let alone how they plan to attain it for themselves.
Maybe you even already work with an advisor who has helped you build assets—now what? Why did you save? How do you know when you have enough? When do you start living your dreams?
Financial life planning is more important now than ever, to help you answer these questions before you wind up with a whole heap of resentment and regret that you didn’t get on the right path earlier.
Since you’re reading this, it’s probably safe to assume you’re one of the rare breed of people who are in search of a plan to make sure your life is heading the direction you want. We’re glad you’re here!
You hear a lot of talk about life planning these days, but it feels like such a big, vague idea. Today, I want to look at what financial life planning is and how it can make a difference in how you view your future.
What is Financial Life Planning?
According to life planning experts Carol Anderson and Deanna Sharpe, financial life planning is defined as:
A collaborative, client-centered approach to communication that integrates a client’s values-based life goals with their financial goals.
In short, financial life planning is about aligning your financial and life goals with your values. It sounds simple enough—and it really is—but as simple as it is, it’s even easier for us to forget.
When I was working towards my Ph.D. at Oregon State, I wrote my dissertation on risk and decision-making. One of the biggest takeaways from my research was that you can make the most elegant, efficient, beautiful plan for something, but if you don’t have the right objectives or goals, none of that really matters.
I spend a lot of time on life planning with my clients because I’ve seen the value of establishing goals that make sense for your life. It’s important that we really understand what people’s priorities are before we start making any plans or recommendations.
Values Determine Goals
Defining goals that will lead to a fulfilling life requires you to think about what’s most important to you. Your values are what make you, you. They inform and help us visualize the life you want, while simultaneously sifting through the broad generalizations people often think of when they picture “goals.” The picture they paint becomes a map for us as we begin to put together a plan.
Piecing Together the Big Picture of Your Life
When you are putting together the pieces of a puzzle, it’s really important to have the picture on the box to know what you’re building. The vision of the life you’re building is a plan for putting the puzzle pieces together.
What is life planning, or financial life planning? What makes it unique? It gets to the core of who you are before doing anything.
For instance, often people set goals like “Save for retirement” or “pay off our house.” They bring those goals to a financial professional and the professional then builds a plan based on their predetermined goals.
Financial life planning goes back another step and asks “why?” Why are those your goals? What are the values behind these goals? Knowing the answer to these questions not only gives you the motivation you need to achieve your goals, but also informs how you will achieve them. Financial life planning aims to get you to the place where you can see beyond vague goals based on what you know you should be doing to build a framework based on what you want to be doing. On your unique purpose. Rather than spending your life striving for goals, the new goal becomes to live a life striving for fulfillment.
Note that this isn’t something you can get by Googling financial advice and adopting some generic plan. Without the proper context, even the best advice is basically meaningless. So the better you understand yourself and communicate that, the better the advice and plan will be.
A Financial Life Planning Exercise
Let’s try a brief exercise, with your life as the primary example for consideration. This comes from a terrific talk by George Kinder, founder of the Kinder Institute of Life Planning.
Ask yourself three questions:
- How would you live your life if money was not an object?
Just assume for a moment that you never have to worry about money ever again. You have all the money you could possibly need. What would you do differently? How might you change the way you’re living, or the way you think about the future?
- How would you live if you only had 5 to 10 years left?
What if your doctor gave you a shocking diagnosis? What if you were assured that you won’t suffer sickness, but you won’t have any warning when the time comes either—what do you do with this news? How would it affect the way you live your life?
- What if you only had one day left?
Now ask yourself what you would do if you were told you only have one day left to live. Are you content with what you’ve done? Do you regret anything you haven’t done? Were you who you wanted to be?
This exercise isn’t meant to scare you, but rather to help you get to the source of what you truly value—the life you really want to live. It’s a necessary process for building your life plan, and essential to the many financial considerations that your life will demand.
Why is Financial Life Planning Important?
Unfortunately, for most of us money is an object, but a good life plan will take the financial obstacles of life into account, so you can be freed up to do the important job of living.
At Clarity, we offer clients a Comprehensive Financial Plan, which uses your goals and values as a starting point for building a life plan.
1. It can help you set the right goals
Once we’ve determined where you are financially and where you’re headed, we’ll help you set the right goals to move forward. We’ll implement clear and easy steps, offer a source of accountability to help you stay on track, and help you meet your goals.
As we work together to meet your goals, we can offer clarity when it comes to making life’s big decisions.
2. Family planning and financial life planning go hand in hand
For most people a good life involves relating to their immediate family and loved ones in their own special way. Parents, siblings, spouses and children—your family forms an important part of your life and we want you to be prepared to keep those relationships through life’s many changes.
3. Be more prepared for the unexpected (and expected) twists and turns
“You can never step in the same river twice.” It’s as true as it is relevant to our present discussion. Life is full of changes—some you can see coming and some seem to come out of nowhere.
Financial life planning can help you not only weather the changes of life, but anchor your decision-making in something beyond your feelings in the moment. Here are just a few examples of situations where financial life planning comes in handy:
More and more people face at least one career change in their life. According to a recent poll, “Nearly 1 in 3 U.S. workers under 40 have thought about changing their occupation or field of work since the pandemic began…”
That statistic resonates with me on a very personal level.
I still remember the rush of fear and excitement as I announced to my former colleagues that I was leaving to become a financial advisor. It seemingly came out of nowhere.
I had spent years of my life studying decision science, but I somehow felt paralyzed when it came to applying the theory of making decisions to my reality.
Financial life planning can help you not only identify the right career for you, but it can help you navigate that change of careers, as well.
Perhaps even more impactful than a change in your professional life can be a change that affects your family life. Whether it’s the loss of a spouse or divorce or something else, such a change can leave you feeling like you’re without a foundation.
While nothing can ensure you will be fully prepared for big life changes, a life plan can serve as a sturdy pillar to rely on when times get tough.
Dealing With a Loss
Any loss can be a devastating blow to your best laid plans. Whether you’re losing a spouse, a job, a career change, or even your retirement, often such losses just can’t be avoided.
If you lose your spouse, your loved one wouldn’t wish their own life’s passing derail yours. As you’re experiencing the complexities of loss and healing, one way to honor a parent or spouse in death is to ensure that finances don’t present a distracting burden.
A good life plan will prepare you to address the tough financial decisions that arise when a loved one has passed.
Caring For Aging Parents
Another major life change that impacts many people in the middle of life is the need to care for your aging parents. Here is an important point where your own life plan intersects that of another. It might be that the very people who gave you life now need you to help care for theirs. It’s important to be proactive about these things, even if the idea of broaching the subject with mom or dad feels uncomfortable.
Taking some time to step back and evaluate the path you’re on can be scary, but it can also put you on the path to living the life you want.
Want to have a better plan for your life? Click here to schedule a complimentary consultation with one of our advisors.