Does the term financial life plan make you think of a blueprint for how to reach your life goals? Some categorize goals in terms of needs, wants, and wishes. I prefer to use the word dream rather than wish. For me, the word dream paints my wishes in full color and in 3 dimensions.

Financial life plan and defining your dreams

The idea of a financial plan is limiting for some people. It often makes people think of something more cookie-cutter. In fact, many of the so-called rules of thumb for planning are based on helping people reach their needs only. You may have heard me refer to this as means-based planning versus dreams. With means-based planning, we can use things like income replacement rates. That talk track goes something like this. If you make $100,000, you’re likely going to need 60 to 70%  of that number when you retire. There are usually certain assumptions built into that percentage like, what your tax rate is going to be in the future and the fact that you won’t have quite the same amount of expenses to go back and forth to work, and the cost of things like dry-cleaning. I don’t know about you, but that doesn’t really get me excited about thinking about my future.

Instead of planning on average, it’s far more exhilarating to think about what would you like to do! Why anchor on the dates when claiming Social Security will be available to you? Instead, why not think about how much I need to live my dreams? That of course requires you to paint a picture of your dreams. Do you want to travel across Europe or Africa? Do you want to pay to travel to visit children and grandchildren? Often I find people don’t paint a picture because they are worried they won’t be able to achieve their wants and wishes.  I say let your dreams get painted and then will deal with the math later.

The math of your financial life plan

After your dream is clarified, we move to figure out how much it will cost. That should include projected inflation rates, for healthcare, costs, etc. Let’s say after doing the calculations, your estimated cost is $2,000,000. Then how much do you need to save given the rest of your personalized, planning assumptions? If you want to travel across Europe when you retire, you may need to buy less expensive cars or choose to live in a one-bedroom home. For some, not living in a four-bedroom room house and having the latest model car would be their definition of living in agony. If this is the case, you may have to rethink both your current and future lifestyle. The good thing is that you become aware of that conflict today to decide your trade-offs rather than having them decided for you.

Are you, or are you married to a business owner? I recently heard someone who’s a prospect say that their spouse is hoping to sell their business and make a lot of money. First, what is a lot of money? Second, when selling a business you have to find a willing buyer who will pay you a premium for your business. A premium that you may not be willing to pay for your own business. Third, when you are ready to sell, the market for selling your business may not be good. In fact, with history as our guide, there are many businesses that are now extinct simply because their services are no longer needed. That argues for some what-if, scenario planning to hedge that risk.

Determining your math and your path

What changes would you be comfortable with in order to reach your financial independence dreams?

  • Saving more by eating out less
  • Accept the risk of pursuing higher market returns
  • Spend less on current expenses. Maybe that means downsizing in terms of a house or car. Maybe that is installing some more energy-efficient tools in your home.

Then you have your own framework of what energizes you to work on a daily, monthly, and annual basis. The hardest part may be sticking to the plan. For that, you may need someone to be your personal financial trainer. But before we get to that, let’s create your financial life plan. Contact us to see how our Envisioneering® Financial Life Planning process may help propel you forward.


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