Paradigm Shift – The Goal of Life is NOT to Maximize Your Finances

 

Written by: Martin Shields, CFP®, AIF®

 

For the first 13 years of my career, I worked in corporate finance for publicly traded companies.  In this role, the primary goal was to maximize the productivity of the company’s assets to provide the highest level of future cash flow.  When I started as a personal wealth manager 20 years ago, I assumed these same ideas would be applied to a household’s finance.  It was one of my first mentors in the business who provided guidance to me that optimizing a family’s finances was important and you want your clients to make smart financial decisions but what was more important was providing peace of mind and optimizing their life fulfillment.  The longer I am in the industry the more I see the wisdom in this guidance.  Part of the challenge is shifting a client’s perspective to align with this view because many have always lived their lives with finances as their top priority causing them to make suboptimal life decisions.

Below are a few examples of how this is applied to a person’s individual situation.

• Not Delegating and Outsourcing – It’s important to have a budget and to live within ones means but to pinch pennies and try to do everything yourself, especially in a household with two incomes and raising a family can cause undo stress and taxes the family schedule.

 

• Moving to Lower Tax states in Retirement – Everyone wants to pay lower taxes, but occasionally I have clients who want to move to states with lower taxes when they have no connections to the state and their entire family and friend group is where they now live.

 

• Distressing over Financial Mistakes – Everyone makes financial mistakes.  The best lesson in life is to learn quickly and move on.  A good guideline is to ask yourself whether your mistake will matter in 5 years, if it won’t then it’s not material.

 

• Chasing Returns – Having FOMO of higher returns is a recipe for disaster.  This is different than having a diversified all equity portfolio.  The chasing means constantly reallocating and trading to higher returning asset classes or stocks.  In most cases this leads to underperformance and emotional stress.

 

• Changing jobs for marginal pay increases – Finding long-term job satisfaction and security is a much better option that switching jobs for a one-time salary increase. I always provide guidance that most people can’t sustain a job that they don’t like for the long-term, even if it is high paying.  It is through job satisfaction and engagement where real wealth is created.

 

• Not Spending Money in Retirement – Changing a client’s mindset to spend assets that have worked so hard to accumulate over their working career can be a challenge.  Once they embrace this mindset, I can see this sense of freedom and contentment. Ultimately, they were looking for permission and guidance on how they should handle their assets and to feel empowered to spend them down.

 

• For Budget Conscious Individuals – Embracing Your Current Lifestyle – The big takeaway with this idea is to appreciate your current financial level at this moment and don’t always be looking to moving up the consumption ladder.  Living in the moment from a budget perspective is much less stressful and anxiety producing than always thinking about the next consumption level.

 

• There Needs to be Another Plan After the Sale of a Business – Many business owners are fully consumed with running their business with the goal of someday selling it for a hefty profit.  They think their life will be a success after the sale and they will be completely fulfilled after the sale.  The reality is that usually 1-2 years after the sale they find they need to be engaged in something more than golf and they need to have a plan for their next chapter.

 

Money and wealth are tools that allow you to meet your basic life needs and after that bring fulfillment to your life.  Truly understanding this perspective can be a game changer for many people who put wealth accumulation as the ultimate goal without understanding how it will be used to better their lives.