There have been many changes when it comes to personal
finances over the last year. It started with the Secure Act passed last
December that made significant modifications to our retirement laws. Then in
March during the financial panic associated with COVID-19, Congress passed the
CARES Act that gave retirees and inheritors a break on taking mandatory
distributions and new options to access retirement funds.
Perhaps more profound in 2020 has been our perception of our
priorities and what we’d like to accomplish over the rest of our lives. With
much of the professional class working from home during at least part of the
pandemic, people have a preview of retirement, albeit one bereft of travel.
This year has been fascinating in that some have been given a taste of the
flexibility of post-work life and want to accelerate their transition. Others
who were planning on wrapping up work in the next few years have decided they
appreciate the structure and sense of purpose found in the workplace.
In many ways this gets back to the core tenets of financial
planning. While reaching financial independence and paying for college are
typically high priorities, we as financial planners cannot properly do our work
unless we explore our client’s desired future. That may end up leading to
boosting their 401(k) contributions, but it could involve going on a
sabbatical, changing careers, and other impactful changes.
George Kinder is widely known in our profession as the
founder of life planning. He rightly reminds us that it is almost impossible to
prepare a financial plan for a client unless we take the time to uncover a
client’s vision of their future. As a tool to get at that vision, Kinder offers
three questions to pose to yourself to focus on what’s important.
The first question concerns if you won the lottery and had
all of the money you ever needed for a good standard of living for the rest of
your days. We’re not talking about enough to buy a professional football team,
but enough so that economics would have no bearing on your future plans. How
would your life change? This is a fun question for most and can involve travel
and some other bucket list goals.
The second question is more poignant and considers
possibilities but puts a deadline on them. Let’s say you go to the doctor and
learn that you have a terminal condition and only have 5 to 10 years to live.
You feel full of energy and perfectly healthy now, but at some unknowable point
time in the next few years that will come to an end. What would shift for you?
How would you live your life? In
answering this question, you will tend to remove aspects that are less
important and bring focus to your true priorities. While travel and experiences
may come into play, family and relationships often come to the fore as well as
unfinished business.
That second tougher question then prepares you for the
third, which is to imagine you go to that same doctor and learn you have a very
grave illness and only have a single day to live. The question becomes not how
you’d spend that day, but rather absorbing that information and reflecting on
what you had always anticipated doing, accomplishing, or experiencing. What did
you miss? What did you not get to be? According to Kinder, family and
relationships most often come up here, as do spirituality and creativity. Often
answering this question, there is a surge of energy that galvanizes you to
change your life as this exercise forces you to emphasize what’s most important
to you.
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