Can Financial Planning Really Be Life-Changing?

If you asked 100 people what the purpose of financial planning is, the reflexive answer of the majority would likely be to have more money. And this underlying belief, spoken or not, is likely why financial planning so often results in under-implemented plans and satisfaction levels that score just marginally above “meh” on a scale of “pointless” to “life-changing.”

But is “life-changing” even a possible outcome for financial planning, or is that lofty aim an overreach?

• For the elderly widow with no heirs I met who, gripped by fears that stemmed all the way back to the Great Depression, compounded by the loss of her husband and his income (50 years before we met), worked as a legal assistant into her late 70’s, never took a day of vacation, saved more than $3 million (a meaningful portion of which resided in bags filled with U.S. savings bonds hidden behind the curtains), never spent a dime of it, and still *saved* a portion of her only retirement income source, Social Security, for whom I was able to quantify “you’re going to be ok,” move her into a beautiful assisted living facility and develop a plan to give $1 million to each of the three charitable non-profits she loved upon her passing—yes, I think financial planning was truly life-changing for her.
• For the newly financially independent 50-something couple who, emerging from a heavy season of work and parenting, successfully launching their two children into adulthood, and learning through a comprehensive cost-of-living / quality-of-life analysis that they could transform their lives entirely by moving to one of a few cities that had inspired them throughout those challenging years—yes, I think financial planning was life-changing.
• For the doctor who had for his entire career said “Yes” to every ask to take overtime, weekend, and holiday shifts that came available, driven by a laudable compulsion to provide for and protect his family while ironically limiting his time with loved ones to the point of strain, learning that he could well afford to say “No” to all extra shifts—and add an additional week of vacation every year until retirement—yes, I think he and his wife would agree that financial planning was life-changing.
• For the couple who realized that their beach home caused more stress than joy and sold it, to the couple who downsized their primary residence and bought a place at the Cape after a health scare reshaped their priorities—yes, financial planning directly influenced these real-life, life-changing stories.

I could fill a book with the transformational planning stories I’ve personally been part of that would expand to a multi-volume series if I included those of the many amazing advisors I’m privileged to know and work with. But there’s a but:

I fear that most financial plans are mere boiler plate box checking exercises. A slight portfolio shift, a calibration of insurance policies, confirmation of estate plans, beneficiary updates, a cursory review of tax returns, a bump in retirement savings.

Indeed, all of these are and should be part of the proverbial plan. But to what end?

The exploration of those ends and the marshalling of financial resources in those pursuits can activate our wealth, and indeed, change our lives.

Would you like a thought exercise that is often helpful in illuminating how your financial planning could be more meaningful?

One of the very first steps in most financial planning is to build a net worth statement—take what you own and subtract anything you owe; that is your net worth. With the advent of online everything, you should be able to arrive at something very close to this number in a matter of minutes.

Once you’ve arrived at that net worth number, now ask yourself this question:

“If I converted my entire net worth into cash and received it in a bag, how would I redeploy it?”

Would I buy my current house back or move elsewhere? Would I buy the same car(s), keep the same job, and work the same hours? Would I reinvest my money the same way?

What would I do differently?

In many cases, our net worth statements—and financial plans—end up being cobbled together as a combination of our circumstances, intuition, and a collection of insight that we read or receive from other people we respect and financial advisors over the course of a lifetime. But when we reverse engineer whatever financial success we’ve accrued and deploy it in pursuit of what’s truly most important, financial planning can—should—be truly life-changing.

By Tim Maurer, Contributor