Determining Your True Values Will Lead to a Successful Financial Strategy
“We want to retire by the time we reach 60!”
“It’s vitally important to send our kids to the college of their choice!”
“I want to quit my job and do something else!”
“We want to buy an apartment in the city!”
We all have dreams. We have those ideas that swim in our minds and create endorphins to rush through our bodies. The hurdle we frequently struggle to jump over is our ability to take those ideas and put them into action.
Lisa and Mark, both in their early 40’s, had been working hard to build their net worth. They lived carefully and thoughtfully, funding their retirement plans and living comfortably within their means. They knew how to save their money for a secure future. When we sat down to talk about their planning goals, the following conversation took place.
Lisa began, “You know, I like my career and the financial rewards it provides, but I’d really like to do something else or work part-time.”
Mark answered, “Yeah, but without your salary, I don’t know if we’ll be on track to pay for college and be able to stop working before our mid-60’s. And we also talked about summer camp for Hilary. It all costs money.”
Lisa looked dejected but offered, “I know. I just feel so torn…”
These conversations are normal. We all have that idea that magnetically draws us like a compass pointing north.
The question is, what is your truth? What is that one idea that, if not attained, will create disappointment or regret?
Determining our true values is a process of thoughts, discovery, conversation and finally an agreed-upon strategy. Lisa and Mark’s assignment was to go home, talk about their prior discussion, and consider what underlying values became clearer and more defined.
Several weeks later, Lisa and Mark returned to reveal the outcome of their conversation.
“Mark and I invested a lot of time talking about this, and I believe we’ve developed our most important values. We decided that while Hilary’s education is very important, we have agreed that unless she earns scholarships, her choices will be limited to state schools. We also expect her to contribute to her school’s tuition. While I would love to change my work situation, we’ve agreed that I will continue another five years and then transition to part-time so we can save more money for our future. We really want the option to make significant life changes in our early 60’s. Can you help us determine whether that’s possible? We value the idea of changing our lives as soon it is practical and rational.”
In summary, Lisa and Mark’s highest priority and greatest value is retiring in their early 60’s. This decision affects their big-picture core values as well as their everyday smaller values, such as the following:
Lisa and Mark made some budgeting choices that helped put them on the path to achieving their most important goal. These choices included decreasing childcare costs by choosing a less expensive option, shaving 25% off their annual vacation budget, cutting 15% off their other discretionary spending, keeping their cars for 8 to 10 years and increasing their deductibles and co-insurance on their insurance plans to save on premiums. They explored other cost-cutting ideas like cutting out cable TV and replacing paper goods like power towels and napkins with cloth.
Incremental shifts in spending, along with careful monitoring, supported Lisa and Mark on their mission to live their highest values. It’s the smartest place to start when planning your life, and the answer is your life’s most satisfying goals.
Retirement Planning Has Its Limits: How to Prepare
Retirement planning is one of the issues that commonly leads clients to consult financial advisers. One of its essential aspects is creating a plan to save and invest in order to provide a comfortable retirement income. Ideally, this starts many years ahead of retirement, even as early as your first paycheck.
As retirement comes closer, planning for it expands to take in a host of other considerations, such as deciding when to retire, where to live, and what kind of lifestyle you hope to have. When retirement becomes a reality, the focus shifts to carrying out the plan.
All of this planning is crucial. Yet, for both financial advisers and clients, it's good to keep in mind that planning has its limits. In the post-retirement years, it may be helpful to think in terms of preparing for old age rather than planning for it.
The older we get, the more important this distinction between planning and preparing becomes. Too many life-changing things can happen without regard to our best-laid plans. Often they occur unexpectedly, resulting in emergency situations where urgent decisions have to be made. A stroke or a fall, a diagnosis of terminal illness, a broken hip that leaves someone unable to go back to independent living—and suddenly, right now, the family needs to find an assisted living facility, arrange for live-in help, or sell a home.
What are some of the ways to prepare for these contingencies?
- Explore housing options well ahead of time. Find out what assisted living, home care, and nursing home services and facilities are available where you live and whether they have waiting lists. Have family conversations about possibilities like relocating or sharing households.
- Research the financial side of these options. Investigate the cost of hiring help at home, assisted living facilities, and nursing care centers. Find out what is and is not covered by Medicare and long-term care insurance. For example, people are sometimes surprised to learn that Medicare does not pay for nursing home care other than short-term medical stays.
- Designate someone to take over decision-making, and do the paperwork. Execute documents like a living will, medical power of attorney, and contingent power of attorney. Update them as necessary, and give copies to your doctors, your financial planner, and appropriate family members.
- Start relatively early to downsize. Well before you're ready to let go of possessions or move into smaller housing, start considering what to do with your "stuff." Focus on the decisions rather than the distribution. There's no need to get rid of possessions prematurely, but decide what you want to do with them—and put in writing. Do this while it's still your choice, rather than something your family members do while you're in the hospital or nursing home
- Do your best to practice flexibility and acceptance. No matter how strongly you want to live in your own home until the end of your life, for example, it may not be possible. The physical limitations of aging can limit our choices, and even the best options available may not be what we would like them to be. It is a profound gift to yourself and your family members to accept these realities with as much grace as you can muster.
Finally, please don't underestimate the importance of planning financially for retirement. Because the bottom line is that you can't plan for all the things that might happen as you age, but you can prepare to deal with them. One of the most useful tools to cope with those contingencies is having enough money.
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