What is your financial goal? Let me guess, you want to be rich. Me too. Who doesn’t?
But the problem is that we all have this amorphous goal of getting rich, without really knowing what it is we truly want to accomplish.
That is why I love what financial adviser and author Tim Maurer had to say in a conversation with my colleagues in Chicago.
If someone had a goal to have $5 million in her retirement account, he would consider that to be a financial goal. The next step would be to find the life goal that supports it. The latter may be a desire for financial independence, a desire for flexibility, a desire to no longer work, a desire to leave a legacy, or whatever.
There is always a life goal that precedes the financial goal. When you begin with life exploration, it leads into the direction of financial outcomes.
So when you say that you want to be rich, you must first articulate what that means for you. All financial goals must begin as life questions. Only then can you move in the optimal direction.
So what is rich to you?
George Kinder, popularly known as the "Father of Life Planning" employs a very pragmatic technique before he conceptualizes a financial plan for his clients. Starting with needs and dreams helps formulate deeply personal and extremely relevant goals.
Individuals are asked to picture these scenarios and then honestly answer the questions.
Scenario 1: You are financially secure. You have enough money to take care of your needs, now and in the future.
- How would I live my life?
- How would I describe a life that is completely and richly mine?
- What would I do with the money?
- Would I change anything?
Scenario 2: You visit your doctor who tells you that you have 5 to 10 years left to live. The good part is that you won’t ever feel sick. The bad news is that you will have no notice of the moment of your death.
- What will I do in the time I have remaining to live?
- Will I change my life?
- If yes, how will I do it?
Scenario 3: Your doctor shocks you with the news that you have only one day left to live. Be aware of what feelings arise as you confront your very real mortality.
- What dreams will be left unfulfilled?
- What do I wish I had finished?
- What do I wish I had been?
- What do I wish I had done?
- What did I miss?
This helps you articulate what it is you want and formulate those desires into goals. Once you get your goals in place, you can design a portfolio towards that end. The right starting point, which is the articulation of your deepest desires and needs, leads to a realistic plan.
When I met Kinder many years ago, he narrated an incident to demonstrate the potency of the above method. At a workshop in the U.S., a man stated that his goal was to buy a particular property, make that project into a reality within a specific time period and earn returns on it.
On answering the questions mentioned above, the individual confessed that his biggest “dream” was to build an authentic and deeper relationship with his 6-year-old son. If he blindly pursued his goal, he would have had to spend even more time away from his son.
Don’t borrow someone else’s idea of what it means or feels to be rich. You must work with your own life-oriented benchmarks. Once that is done, you can put a figure to it and design a portfolio around it.
Goals are very subjective, and emotional. And then must always start with the heart before they can be worked out on an excel sheet.
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Articles by Investment Specialist Larissa Fernand