Adding Purpose to Your Financial Plan

“If the ladder is not leaning against the right wall, every step we take just gets us to the wrong place faster.”

- Stephen R. Covey

Why are you seeking a financial plan? No really, what is driving it for you?

• To figure out how to save more money? To what end?
• To try to find a way to pay less in taxes? What will you do with your savings?
• For better investment returns? That’s nice, but you can’t take your stocks on a family vacation.

What would accomplishing each one of those things do for you?

Creating Purpose

Figuring out the purpose behind your financial plan will make creating, implementing, and sticking with your plan much easier. This purpose can show up in different forms. I like to put mine at the top of the “One Page Financial Plan” I create for clients. On a recent podcast financial planner Carl Richard called it the client’s "Statement of Financial Purpose." If you’ve read any of the leadership guru Simon Sinek’s work, it’s sort of like finding your “Why?”

Creating the purpose statement should be one of the first things you do with your financial planner. Before we look at whether you should contribute 7% or 8% to your 401k, or whether you should have 80% stocks or 90% stocks in your portfolio, the purpose behind your financial plan should be discussed and noted so that both the advisor and client know what they are planning for. How could we possibly know how much you need to save and where to invest it if we don’t know what you’re saving and investing for? Going back to our Stephen Covey quote at the top of the article, your statement of financial purpose tells us which wall to put your ladder on.

Your statement of financial purpose can be anything you want it to be, and on the surface it doesn’t have to appear financial. Often it is not financial, we simply use money as a tool to achieve our purpose.

A millennial may want to move beyond the feeling of living paycheck to paycheck, or to start a family and buy their first home. More established individuals may seek a life where they can spend more time with their family, to create space in their life to coach their child’s sports team, or to start their own business. Retirees also often express a goal to simply spend more time with their children and grandchildren, or to avoid being a burden on family as they age. Reduced anxiety, more freedom, providing an opportunity for someone else you wish you had growing up, these are just some of the ways financial purpose can show up.

When big decisions come up, or when the going gets tough, your statement of purpose comes back out to help guide us through decision making. Since we developed our purpose with cool heads, at the beginning of our financial planning journey when the reasons for planning were fresh in our mind, it serves as a reference point for when emotions start to run high. If you’re car shopping and you find the perfect car for $35,000 but the salesperson has a $45,000 car you just have to test drive, your purpose can steer you in the right direction. If you are tempted by a job offer that you know will pay $25,000 more per year but will require 15 more hours of work each week and more time away from family, your purpose statement can help you remember what you decided was more important.

Establishing the purpose being your financial plan, or putting the ladder up against the right wall, should be the first step in any financial plan. If it’s not, ask yourself how do you know if you’re headed in the right direction, and how will you know when you’ve gotten to the top? Tax strategy, asset location, savings hacks, these are all great tools in the toolbox once you know what kind of financial plan you’re building.

Need help defining the driving purpose behind your financial plan? Schedule an intro call to learn more about how we work with clients in helping them define the goals of their financial plan and use the right tools to achieve them.

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