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  • Writer's pictureMatthew Kelley

Money Matters – Bringing Value to Your Life With Wealth

Updated: Jan 6, 2021

Not long ago, a financial institution aired a television commercial that showed different people walking around a city, each one carrying a long string of numbers, such as 1,985,986 or 2,568,315 and so on. The number was the person’s goal for his/her retirement savings, and the ad posed the question, “what’s your number?” In our view, asking and fully answering that question can have a profound impact on your life.

Philosophers, poets, and inspirational trail-blazers all tell us, money is a means to an end, not an end in itself. Yet, most of us spend much of our lives focusing on how to increase the amount of money we have – even (perhaps especially) those who already have a fair amount of it – without giving much thought as to why.

In this article, we discuss why we urge people to view money as a means to an end and why regularly recentering on that perspective is far more rewarding and enriching than focusing on the dollar amount in your investment portfolio. First, we invite you to take a moment to think about things you’d like to do in your life. That could be almost anything – traveling, pursuing a “second act” career, mastering a new skill, buying a vacation home, devoting time and effort to causes that light your fire, and so on. Note that money can usually (not always, but usually) help you to do these things. That is money’s role in bringing value to your life.

Your “Number” Depends on Your Priorities

Aside from representing security and freedom from want, the purpose of money is to allow you to pursue what is meaningful to you in this life. You cannot determine your “number” – how much money is enough – and whether you are on track to get to that number in time to do, see, accomplish, give, and enjoy whatever things you want to do in life until you get very specific about what those things are and the order of their importance to you.

Furthermore, suppose you do not identify your goals. In that case, you subject yourself to constant stress, anxiety, and worry about not having enough money. It is less stressful to realize that you do not have enough than to avoid the question altogether. You can then make a plan to address the shortfall, possibly by curtailing the goals you want to pursue. In short, your priorities for your money determine how much money you need.

Three Questions

The “Physician Philosopher” George Kinder poses three questions to help people get at this issue. We paraphrase them here:

  • #1: Imagine you are financially secure, with more than enough money to take care of your needs, now and in the future. What would you do? Would you change anything about how you live your life? This question is designed to help you identify what matters to you most.

  • #2: Your doctor says you have five to ten years left to live. What will you do in the time you have remaining? Will you change your life, and if so, how? This reminds us that we are all mortal and that “someday” will never come.

  • #3: You are told you have only one day left to live. What do you wish you had done that you didn’t do? The goal here is to bluntly examine whether you live your life today in a consistent way with your priorities.

What does all of this have to do with investing and financial planning? This self-reflective preparatory work is absolutely critical before deciding how you should be saving and investing. The insights you generate by doing so are absolutely essential for developing the financial plan to put you on the best possible path to achieving your desires.

Which category are you in?

Once you understand your priorities and estimate your “number” (what it will cost to do what you want to do), you will find you are in one of three categories: not enough, too much, or just right. Where you are is a function of your goals, how much you earn, how much you spend and save, your investment decisions, and other factors. Knowing your category allows you to make significant, thoughtful decisions about where to go from here.

Not Enough – If you are in this category, you need to reduce your expenses, increase savings, and/or modify your goals. For example, you could either decide to spend a couple more years in the workforce or reduce your planned retirement expenditures. Age is, unsurprisingly, an essential factor. The younger you are, the more time you have to “cure” the problem. Suppose you are young and there is a wide gap between how close you can get to your “number” and the number itself. In that case, you might consider making some significant changes, such as a career shift, but at least you know where you are. If you are not young, you may want to radically change your lifestyle, perhaps by moving to an area where the cost of living is lower. Paying off your mortgage as soon as you can, which guarantees you have a roof over your head for the rest of your life, can be a game-changer. It reduces stress AND frees up your cash to do other things. You will have less stress at any age by going through this analysis because you know how your baseline needs will be met.

Too much – Is this even possible? Yes, and for more “regular” people than you might think! Suppose you consistently live below your means (whatever those means may be). In that case, once you have identified your goals and you know that your wealth exceeds your number, you need to think about what you want to do with your “excess” money. You may choose to live a more lavish lifestyle, bequeath it to your children, grandchildren, or to a charity. Or you may decide to give some of it to the intended recipients while you’re still alive so you can help them succeed in their endeavors now (which could be life-changing for them), rather than waiting until you die when you can no longer witness the impact of your generosity.

An often-overlooked aspect of this category is what it feels like to minimize risk in your investment portfolio. If you have far more than you need, there is no need to pursue investment returns – all you need to do is preserve what you have. Often, ego gets in the way – we compare our investment returns to some external benchmark and feel upset or angry if our money “underperformed,” but if you have a lot more money than you need, there is no use making those comparisons. You can de-risk your portfolio and virtually ignore the stock market.

If you’re not convinced you have more than you need, or have a nagging feeling that “I shouldn’t spend more”, a fee-only financial advisor who is not affected by whether you keep your money in your investment portfolio, spend it or give it away can be an objective expert who tells you that you really can afford to do X, Y, or Z (or all three). This can bring a sense of freedom that you have never experienced before. That’s the main reason why we advocate using a fixed annual price based on your unique complexities and required expertise instead of merely charging a percentage of Assets Under Management (AUM).

Just Right – This is an exciting place to be, with both pros and cons. “Just Right” means the trajectory of your savings and expected level of spending (with assumptions about investment risk and returns factored in) will provide the lifestyle you need. However, you will probably not have much left when you die. While being in this category means you are clearly on the right track, uncertainty can degrade the quality of the life you live today. For example, you may take less expensive vacations than you could actually afford, out of an abundance of caution. Or, you may take more risk than you need to in your investment portfolio to reach for additional return. Behavioral components can be an issue for people in this category, too, just as in the others. For example, some people are unnecessarily frugal due to some childhood deprivation; others always scrutinize their investment portfolio. This is something a financial advisor can help you work through – freedom and satisfaction are meaningful; pinching pennies and looking at your portfolio’s return month to month isn’t.

Financial security gives us the freedom to explore, to take risks, to try something new. If the path you want to follow and the adventures you want to have in life will require more financial resources than you have or are likely to have in the future based on your current plan, take the time now, with some expert assistance from a qualified advisor, to revise your plan. Speaking of planning, it’s a cliché to say, “if you fail to plan, you plan to fail,” but there is something to this. A recent Harvard Business School study showed that the 3% of their MBA students who identified and wrote down their goals and aspirations when they graduated earned more than the other 97% just 10 years after graduation.

It’s also a cliché to say that time passes quickly, and the older you are, the faster time goes, but it’s true. Imagine your life as a two-week vacation. At the start, you are likely in no hurry to see the sites or rush into other activities on your “to do” list. After all, you still have plenty of time. Maybe you do a couple of things here and there, and then there are 10 days left. Still a reasonable amount of time, you think. Then a week has gone by; you’re halfway through the vacation, and you haven’t done as much as you’d planned. Soon, you’re on your way home. The brutal truth is: if you’re over 40, you’re in the second week of the “vacation” that is your life. You don’t want to live a life full of stress about money; you want to enjoy what you are working to create. It all comes back to the question of “what do I want to do in my life, and how much is enough to do that?". Answering those questions allows your money to bring real value to your life. Reach out to us with any questions.


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