It’s been a quiet few weeks for me during these “dog days” of summer. I’ve taken advantage of my slower schedule to noodle on some recent client interactions and what they’ve taught me about financial planning.
When Matt and I first delved into the field of financial planning, it was still quite new to the financial services industry. Wealth managers had historically only proposed investment ideas and then touted/defended their performance depending on the current market environment.
Over time, however, forward-thinking financial professionals had started picking up on common client questions, such as:
- “How much money do I need to fund my life?”
- “When can I retire/move/take Social Security?”
This resulted in an industry expansion beyond the calculation of returns and into the adoption of new technologies that answered such questions.
As Matt and I encountered similar client inquiries, we made the decision to purchase one of those financial planning software subscriptions and dove in (and, well, the rest is history).
The next step was for us to become Certified Financial Planners (CFPs). We each attended a series of classes and passed an exhaustive exam. And now that we’re designated CFPs, we must undertake 30 hours of continuing education every two years to maintain our standings.
(I informally view the completion of these requirements as a race between Matt and I, and one that I must win. As of this writing, I can only assume I’m ahead by at least 10 hours. But don’t tell him. It’s easier to win if he doesn’t know).
Continuing education covers a variety of topics, all of which boil down to what the CFP board believes constitutes a financial plan—a document with goals, calculations, and recommendations.
In a past life, I would have agreed that those were the core ingredients — you tell us what you want, we do some math, and then we recommend a way to get you there.
And in many ways, that remains true. But I’ve since learned there’s even more to it—especially if the plan is going to provide the most value to you.
Several of my recent financial-planning interactions have diverged from our typical retirement-planning path; they’ve forced me to think more creatively about what makes a good financial plan.
The last few “plans” I’ve worked on have been for younger clients, some just starting out on their financial journey and others in the midst of it, seeking greater clarity.
As we’ve worked through their questions and data, it’s dawned on me that a greater story is unfolding—not just about goals, calculations, and transactions, but rather about purpose, intention, and ultimately hope—concepts that I believe are even more critical to living a good life.
Purpose
It doesn’t matter what stage of life you’re in, everyone has a reason for seeking financial advice. Matt and I used to try to get to the heart of those reasons by asking (and we still do):
“What are your goals?”
The most obvious answer (and the most common) has always been:
“To have enough money to last throughout retirement.”
But what’s been interesting about some of my recent clients is that they are crushing that goal.
They’re maxing out their 401(k)s!
They have significant savings!
They’re on track for retirement!
However, they still call us with anxiety. And the question that’s top of mind for them isn’t, “How do I save for retirement?” but rather:
“How do I make sense of everything related to finances?”
Great question.
Financial life in the 21st century is overwhelming. I feel that way and I do money-related stuff for a living. There is a deluge of financial information and no universal metric for success. It’s really hard to know what to do or if you’re doing it well.
To help answer this question, I’ve started asking one of my own:
“What is the purpose – of this plan, of your wealth, of your life?”
And the answer matters. And the answer is personal to you and you alone.
Because here’s the thing: there will always be someone doing more or someone with more. It’s a fool’s errand to benchmark against others or the ever-shifting goalpost of “more.” But we can benchmark against what we want.
Are we saving to provide comfort for ourselves—whether now or in the future?
To create a safety cushion for our children?
Is our purpose to live with freedom so we can be present for our families, to say no to working overtime?
Is it to live generously and with joy?
When we start answering the question of purpose, the outline of a meaningful financial plan starts taking shape.
Intention
Once we have an idea of where we want to go, we must be willing to do what it takes to get there.
When I wrote my first book, A Girlfriend’s Guide to Personal Finance, I dedicated a whole chapter to discussing the ideal budget. Unfortunately, it was just that – an ideal. It wasn’t pragmatic.
In real life, we don’t get to choose the starting amount of capital we have (unless we’re really good at negotiating our salary and, even then, we have no control over the cost of taxes or utilities or the ever-increasing price of eggs).
And then we must decide, prioritize, and make tradeoffs. Sometimes those tradeoffs are hard. I’ve had many conversations with young families who are torn between daycare costs and saving for the future.
Sometimes we need a plan that is realistic enough for us to have the discipline to follow it. Otherwise, we’ll throw all our good rules-of-thumb to the wind and live in chaos.
A good plan is achievable and gives us a chance at living intentionally. As a planner, it’s my job to find a path forward that you can imagine yourself taking.
It means asking you:
“Is this plan something you think you can do?”
And if the answer is an honest “no,” then we need to brainstorm something different.
Hope
Over the past year I’ve been incredibly fortunate to mentor several students from Pepperdine University, my alma mater.
The students have reminded me of the importance of hope. On the cusp of their adult lives, they’re bursting with optimism, but at the same time, I can sense their uncertainty.
The world is complex and chaotic, and there are plenty of reasons to feel hopeless. But hope is a necessity. Psychologically, hope is what we get up for—the idea that there is something good worth pursuing.
And this is true of financial planning as well.
One of the most satisfying aspects of my job is creating a plan that gives someone hope. When a client leaves a meeting saying, “I feel so much better about everything,” I rejoice inside because that is success.
And sure, there might be some tough news along the way. They may fall behind or need to cut back on spending to catch up. We might have to break the news that not all their goals are possible.
But for a plan to be meaningful, it must inspire some kind of hope—even if it’s just a little at the start, because hope is what moves us forward.
Hope propels our intention towards our purpose. So, it’s hope that we work at Sherwood to create. In the end, that is ultimately what makes your financial plan a good one.
