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Amassing wealth is an important factor to a successful financial plan, but should that really be the goal and the definition of a winning plan?
Exhausted, you roll over in bed to shut your alarm and begin wearily scrolling through your phone for as long as possible to ignore the thought of having to go to work. The stress rises as the reality sets in of having to go to work to pay for your family’s expenses, your crushing debt, while somehow saving as much as possible to catch up on funding your retirement so that one day you can retire and be happy. Sound familiar?
Studies show that roughly 76% of employees in the US report experiencing burnout (Ju, 2021). This staggering number is a function of a multitude of causes, but I would argue that a focus on money instead of well-being is a major contributor to burnout in our society from an institutional and personal level. Trying to convince institutions to change their focus from money to well-being in a world of budgets and bottom lines is surely a formidable task but the personal level is a different story.
An old-school financial plan’s success is defined by helping the client amass the most money as possible. The higher the net worth, the more successful the plan. Albeit, amassing wealth is an important factor to a successful plan, should that really be the goal and the definition of a winning plan? Money itself is nothing more than printed paper or a digital number on a computer. Too many people get emotionally caught up with trying to seek out a number in their bank account and lose track of the real meaning of money… a means of exchange. An exchange for vacations, college education, helping others, hobbies, time off with loved ones… the list goes on. When money becomes the focus, the aperture through which we view life closes, and burnout sets in. This article is intended to perturb your thinking around conventional financial planning while following the SOAP Note method that a physician would take to document a care plan for a patient.
Objective Review: The Financial Physical
It is important to have a professional look under the hood to see what you currently have in place. Just as a doctor will do a physical to assess current standings of a patient’s health, it is important to have the same done in your finances. Reviewing cash reserves, debt and investment strategies, and insurances in place is critical to making sure you have your bases covered. Sometimes you do not know what you do not know and so be sure to work with an advisor with proper experience and training to assist you with identifying red flags in your financial situation.
Subjective Review: It’s more than just money.
It is vital to understand where you feel that you are at financially, as well as understanding your history with money. Some might come with unique emotional baggage when it comes to money and so it is important to acknowledge this prior to crafting any plans. Never want to treat a symptom without understanding the disease.
Money is simply a means of exchange and so you must identify those things in life that you want money to support. Money itself is rarely the goal. I would argue that people’s lives can be broken down into five distinct areas that contribute to them being happy and fulfilled in life. Those are career, relationships, self-care, selflessness, and spirituality. When it comes to overall wellness and life contentment, all these areas of your life must be moving in harmony. Have you ever had a conflict with a close relationship of yours and then try to compartmentalize it while you go to work? How about trying to go on vacation with your family while your email is getting blown up with questions about a conflict at work? If you have experienced either of these, you will quickly realize how these life areas are all truly intertwined no matter how good you are at compartmentalizing your life. Understanding what is important to you in each of those five areas of your life will be helpful when crafting plans.
Assessment:Are you on track to the right goals?
This is the time to check your current financial trajectory and identify if that aligns with your short- and long-term life goals. Some may find that they were chasing monetary goals that had no basis in creating more well-being in their life. We are taught to assume that more money equals more happiness, but that equation does not always work out. Studies show that an individual’s salary of $75k/yr satisfies emotional well-being. After this point of income, there was little to no correlation between more money and more well-being (Kahneman et al 2010).
With that said, before we can identify if we are on track, we need to establish our life goals that bring us more well-being and fulfilment. Although it may seem like an easy task, you will find that “happiness” can be a quite ambiguous term and hard to quantify outside of the obvious things that bring positive emotions into your life. Since we need specificity when it comes to crafting plans, we must turn to the latest evidence-based research in the Positive Psychology domain to help.
Martin Seligman, the father of the positive psychology movement, developed the PERMA model as a way to help us get a grip on what exactly “happiness” means and how to find this well-being in your life. Seligman’s model consists of Positive emotions, Engagement, Relationships, Meaning, and Accomplishment (PERMA). Below we will evaluate each of these areas and how we might think to incorporate them into your life plan.
Positive Emotions: These are the things that elicit positive emotions and is most synonymous with happiness. This can include buying that new car, going on that trip, winning that award.
Engagement: These are the activities that you lose track of time doing. This is the thing that you do after a stressful day/week to “reset” yourself. This can be exercise, a hobby, or even your work.
Relationships: These are the things that you do to foster deeper relationships with your family, loved ones, and friends.
Meaning: What things do you do that give you a sense of meaning or that you are serving others and/or a higher purpose? Some may find this in their job, mentoring, giving, volunteering for a charity, etc.
Accomplishment: These are things that we set goals around and take steps to attain. Our society fosters and rewards accomplishment during the early stages of life with school, sports, etc. but many forget that this must be maintained to continue the sense of well-being. This could be running that marathon, getting that promotion, or even hitting a new personal best in the gym.
Write the things that you do currently in each of those areas and how much time/money that you spend on that activity. Research suggests that those who have a more even spread across the five categories, experience markedly more well-being in life and tend to flourish more than those who do not. Once establishing your baseline, write out what you would do to bolster each of those areas of PERMA in your life if money was no object. These are your true goals that are worth building a financial plan around. (Kern et al., 2013)
Use a professional to assess your financial trajectory towards those newfound goals while you self-examine your current habits and non-monetary trajectories in the various areas of your life. This will shine light on opportunities for improvement or course-correcting that the plan should be built around.
Plan: What is the care plan Doc?
The CFP Board lays out five financial planning domains: Investment, Retirement, Tax, Insurance, and Estate planning. Once discovering your new life goals, this is the time to work with a professional to help you identify if these five domains of your plan are addressed and actively supporting your life goals.
When developing the plan, the focus should be on breaking it down into six-month increments. This bite sized approach will both allow for a simple plan to be implemented while also building in opportunities for adjustments after each six months. This “tacking” approach allows for easier course corrections in the ever-changing winds of life. Since everything cannot be done all at once, an up-to-date professional will be able assist you with prioritizing those items that need immediate implementation while also laying out tangible financial and behavioral strategies to support your well-being goals.
Some may find that they do not have enough money to hit their goals which leaves us with a few options:
Delay the goal
Spend less money
Make more money
The first option is a realistic option as long as you are able to keep the five areas of your life in harmony during your quest for the long-term goal. When it comes to the second option, you will be faced with a subjective value assessment that is: do you value a piece of your current lifestyle more than your goal? If this is the option that you choose, most will find that if you have a developed a strong enough “why”, the cutting of your expenses will be much less painful. Also, never rule out the third option. Some feel that they are stuck with the income that their work offers them but there are often other ways to monetize your skillsets in alignment with your passions and so never rule this option out.
As President Eisenhower once said: “Plans are nothing. Planning is everything.” This planning process is much more than just developing a financial plan to get you to an end point. This holistic approach will allow you to uncover your unique blueprint for well-being in life as opposed to simply a plan for more legal tender. By finding those things that bring eudaimonia and creating the steps to attaining them in your life, you can unroot an infinite flame and entirely change the reason why you get up in the morning.
Michael Foley, CFP, CSLP, is a comprehensive financial advisor at North Star Resource Group. Complementary, no obligation student loan counseling available for medical professionals in training. Contact Michael at Michael.Foley@NorthStarFinancial.com or 480-993-9491.
NORTH STAR CONSULTANTS, INC. - INSURANCE PRODUCTS AND SERVICES. CRI SECURITIES, LLC - SECURITIES AND INVESTMENTS. SECURIAN FINANCIAL SERVICES, INC. – VARIABLE PRODUCTS AND SECURITIES. SECURITIES AND INVESTMENT ADVISORY SERVICES OFFERED THROUGH CRI SECURITIES, LLC AND SECURIAN FINANCIAL SERVICES, INC. MEMBERS FINRA/SIPC. CRI SECURITIES, LLC IS AFFILIATED WITH SECURIAN FINANCIAL SERVICES, INC. AND NORTH STAR RESOURCE GROUP. NORTH STAR CONSULTANTS, INC. IS DOING BUSINESS AS NORTH STAR RESOURCE GROUP AND IS INDEPENDENTLY OWNED AND OPERATED. MICHAEL IS A REGISTERED REPRESENTATIVE AND INVESTMENT ADVISOR REPRESENTATIVE OF CRI SECURITIES, LLC AND SECURIAN FINANCIAL SERVICES, INC. 3598869/DOFU 5-2021