A great way to arrive at financial goals

May 27, 2019

In What would it take to feel Wealthy? we noted that individuals operate with an amorphous goal of "amassing wealth" rather than thinking through the specifics of what they would like to accomplish. A great starting point is looking at your needs and dreams; it helps you formulate goals that are extremely relevant.

Sounds easy, I know. But George Kinder has a way to go about it. He has developed a repute in financial circles that has resulted in the title Father of Life Planning being bestowed upon him. There is a very pragmatic and fascinating technique he employs before he conceptualizes a financial plan for his clients.

Individuals are asked to picture these scenarios and then honestly answer the questions.

Scenario 1You are financially secure. You have enough money to take care of your needs, now and in the future.

  1. How would I live my life?
  2. How would I describe a life that is completely and richly mine?
  3. What would I do with the money?
  4. Would I change anything?

Scenario 2You visit your doctor who tells you that you have 5 to 10 years left to live. The good part is that you won’t ever feel sick. The bad news is that you will have no notice of the moment of your death. 

  1. What will I do in the time I have remaining to live?
  2. Will I change my life?
  3. If yes, how will I do it?

Scenario 3Your doctor shocks you with the news that you have only one day left to live. Be aware of what feelings arise as you confront your very real mortality.

  1. What dreams will be left unfulfilled?
  2. What do I wish I had finished?
  3. What do I wish I had been?
  4. What do I wish I had done?
  5. What did I miss?

This helps you articulate what it is you want and formulate those desires into goals. Once you get your goals in place, you can design a portfolio towards that end. The right starting point, which is the articulation of your deepest desires and needs, leads to a realistic plan.

When I met Kinder a few years ago, he narrated an incident to demonstrate the potency of the above method. At a workshop in the U.S., a man stated that his goal was to buy a particular property, make that project into a reality within a specific time period and earn returns on it.

On answering the questions mentioned above, the individual confessed that his biggest “dream” was to build an authentic and deeper relationship with his 6-year-old son. If he blindly pursued his goal, he would have had to spend even more time away from his son.

(Of course, this is where the role of a financial advisor or planning is so relevant).

If you see the responses to the question, what does it mean to be wealthy? you will decipher that it is less about investing, and all about perceptions, dreams and legacies. In other words, subjective and emotional. Once you have personal, life-oriented benchmarks, only then can you put a figure to it and design a portfolio around it.

In Loaded, Morningstar’s behavioural scientist Sarah Newcomb makes a very pertinent point which we tend to ignore in real life.

Money is just a simple tool.

Money is an inanimate object with no power of its own.

Money is neither good nor bad. It is a neutral resource full of possibilities.

How a person uses it is entirely a matter of personal choice. You may choose to donate the bulk of your wealth to charity, or you could decide that only your family will be beneficiaries. You could decide to take an Alaskan cruise when you retire, or you could be done travelling and now want a peaceful retired life gardening and playing with grandchildren. You may need to have a certain possessions to "feel rich", or you could be into minimalism and define "rich" differently.

Your experience is unique. As a result, there is no one size fits all solution. There is a story that runs parallel to the numbers. Work with the story first, the numbers will then adapt to that.

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