The Most Important Question in Personal Financial Planning

For five years, my wife and I worked long hours teaching in Washington, DC public schools. Once per year, we would meet with someone for personal financial planning. Every time, the conversation revolved around a few key questions: Did we have enough insurance? Were we putting enough money away for retirement? What kind of mutual funds would we like to invest in?

Then, in December of 2008, we shook things up a little bit and hired Paige -- a professional recommended by friends -- to help us with our financial planning. After the initial introductions, Paige led off by asking a question that stopped my wife and I in our tracks: "What experiences do you want to get from life?"

The room went silent. We hadn't prepared for such a deep question. The silence went on for a good minute, until I finally chimed in and said, "A little more time to ourselves ...I  guess."

What guides your personal financial planning?
For months afterwards, my wife and I continually came back to Paige's question. We gave it the type of thought that a topic like that deserves.

The reason this different outlook shook us so much is that it turned the whole experience of traditional financial planning on its head. Previously, we believed that there were "normal" goals that we needed to work toward -- buying a house and car, saving for retirement, and sending kids to college -- and essentially, all big decisions revolved around those goals.

With this new question -- of how we wanted to experience life -- the paradigm changed. Instead of financial planning being about end goals, it became more about process-oriented, experiential goals.

Here's a good way to think about it:

Source: Author's representation of traditional financial planning versus financial life planning.

Signs of a growing movement
It turns out that Paige wasn't alone in asking her clients to take a more psycho-spiritual approach to personal financial planning. There's a burgeoning movement within the field, and it's led by George Kinder, who has developed a structure for what he calls "Financial Life Planning."

Like Paige, Kinder delves deeper into the psyche through probing questions. Unlike Paige, he has developed three questions to help guide an effective planning process. Each one is based on a distinct set of circumstances, and hopes to tease out something unique.

Circumstance

Question

What it Reveals 

You are guaranteed to be financially secure now and in the future.

How would you live your life? What would you change?

Part one shows where your intrinsic motivation lies.

You visit your doctor, who tells you that you have only five to 10 years to live. You won't ever feel sick, but you will have no notice of the moment of your death.

What will you do in the time you have remaining? Will you change your life-and how will you do it?

Because there aren't unlimited funds, this helps ground your desires within your real-life financial situation.

Your doctor shocks you with the news that you only have 24 hours to live.

What did you miss? Who did you not get to be? What did you not get to do?

It's not about how you'd spend your last day, but what you'd regret not having done -- and motivates you to do those things.

Source: Kinder Institute questions for financial life planning

Though it might seem hokey, these questions help provide a shift that can be very liberating. Instead of making life decisions based on the fear of not being able to afford something, you are making your decisions from a more nurturing place -- based on your personal and unique desires.

Next time you read about the "1 Must-Buy Stock," or the "Industry That Will Guide You to a Comfortable Retirement," and feel the need to act for fear of missing a big payday, remember to check back in with these three questions.

Taking on financial matters with your own responses in mind will put your mind at ease, and allow you to approach investment decisions from a much saner perspective. My wife and I actually earn far less than we did when we met with Paige, but we wouldn't trade our lives now for anything -- and that should be the true aim of personal financial planning.

Looking for a little help?

It's tough to help each reader via this website figure out his or her life goals.  That requires meeting with a Life Financial Planner.  But we can do what we can to help you with retirement.  Learn about The Can't-Miss Truth About Your Retirement. It won't cost you a thing, but don't wait, because your free report won't be available forever.


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  • Report this Comment On May 11, 2013, at 2:54 PM, dstwhit wrote:

    Excellent article, Brian!

    Thank you. Especially motivating to me, because I know you actually practice living by these questions. Time for me to step out of my office and go read or play with the kids!

    Denton

  • Report this Comment On May 13, 2013, at 4:50 PM, HectorLemans wrote:

    I don't know... I think you might be making it more complicated than it needs to be. For me, financial planning is sort of like what Percy Bridgman said about the scientific method: "The scientific method, as far as it is a method, is nothing more than doing one's damnedest with one's mind, no holds barred."

    For investing and financial planning I'd modify that quote to say: "Investing is nothing more than doing one's damnedest to make the most amount of money with the time you have available, no holds barred."

  • Report this Comment On May 14, 2013, at 10:37 AM, watson14 wrote:

    Next re-read "The Biggest Retirement Myth Ever Told" on Fool - which will add a few more variables to the retirement stew.

  • Report this Comment On May 16, 2013, at 5:08 PM, Borbality wrote:

    my guess is that in order for most of us to get the experiences we want, we need to buy a certain amount of insurance, invest a certain amount of money and work a certain number of years.

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