Is It True That Financial Planning Can Change Your Life?

If you were to ask 100 people about the purpose of financial planning, many would likely respond that it’s about accumulating more wealth. This common belief—whether explicitly stated or not—often leads to financial plans that are poorly executed, resulting in satisfaction levels that hover just above “average” on a scale from “useless” to “transformational.”

But is it truly possible for financial planning to be transformational, or is that expectation overly ambitious?

Consider the case of an elderly widow I met, who, haunted by experiences from the Great Depression and compounded by the loss of her husband decades earlier, continued to work as a legal assistant well into her late 70s. She saved over $3 million, much of it stashed away in bags of U.S. savings bonds hidden behind her curtains. Despite her significant savings, she never spent any of it, even saving part of her Social Security income. After we assessed her situation, I was able to reassure her that she would be okay, facilitating her move into a lovely assisted living facility and establishing a plan for her to donate $1 million to each of the three charitable organizations she cherished after her passing. In her case, financial planning was undoubtedly life-changing.

Similarly, for a financially independent couple in their 50s, who had just launched their children into adulthood, financial planning helped them realize they could relocate to one of several inspiring cities they had long admired. After a thorough analysis of their cost of living and quality of life, they discovered they could completely transform their lives. Here, too, financial planning was life-changing.

Take the doctor who, throughout his career, accepted every opportunity for extra shifts—overtime, weekends, holidays—out of a commendable desire to support his family. However, this habit strained his family life. Financial planning revealed that he could afford to say “no” to those extra shifts, allowing him to add an extra week of vacation each year until retirement. I believe he and his wife would agree that this was a significant change facilitated by financial planning.

From couples who recognized that their beach house brought them more stress than joy and decided to sell it, to those who downsized their primary residence and bought a new place at the Cape after a health scare shifted their priorities, financial planning has played a crucial role in many transformative stories.

I could easily fill a book with the remarkable transformations I've witnessed through financial planning, and it could expand into a multi-volume series if I included the inspiring stories of the many incredible advisors I work with. However, there’s an important caveat:

I worry that most financial plans are merely routine exercises that check off boxes. They often involve slight adjustments to portfolios, fine-tuning of insurance policies, updates to estate plans, and quick reviews of tax returns or retirement contributions.

While all these elements are essential parts of a financial plan, one must question their ultimate purpose.

Exploring those purposes and effectively utilizing financial resources to pursue them can truly activate our wealth and lead to significant life changes.

Would you be interested in a thought exercise that can help clarify how your financial planning might be more impactful?

A common initial step in financial planning is creating a net worth statement—calculating what you own and subtracting what you owe. With today’s online tools, you can arrive at a fairly accurate net worth figure in just a few minutes.

 

 

 

 

 

 

 

 

Paraphrasing text from "Forbes" all rights reserved by the original author.