What is meant by “purpose-driven finances”?
It simply means that money and wealth are just numbers on a ledger; they are nothing without a purpose attached to them.
In retirement, that purpose is different for everyone. But remember, this is not about rate of returns. Instead, the question is, “What do you want the wealth you have accumulated to do for you in retirement?” When I ask people that, most often their responses include maintaining a comfortable lifestyle, giving to charity or providing for their family. However, as the retirement years pass, the purpose for the money can change as circumstances change.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Let me give you an example. One couple I worked with thought they had their finances and purpose in place – until their son passed away. When that happened, they decided they wanted to provide for their grandchild’s needs through college. We met and adjusted their financial plan to help work toward this new reality – and new purpose.
Even my own financial purpose has changed.
I grew up in a modest home, and there wasn’t extra money around. My financial purpose was to live comfortably and provide for my family in a way I had never known. But my purpose changed when someone challenged me to look at the giving side. Instead of the purpose being about us, I began to make it about others. This was a defining moment in my life.
By planning with a purpose, you learn that having all the money in the world will not bring happiness, but having a purpose can bring you the happiness you seek. Think about Ebenezer Scrooge, who hoarded an enormous amount of wealth, but lived a life of misery. It wasn’t until he donated to charity and provided for the care of Tiny Tim that he realized true happiness.
In my 30 years of experience as a financial professional, I’ve found that the better I get to know my clients, the more we are able to build a trusting relationship. After all, they want the assurance that their lifetime of savings will be preserved. In my first meeting with a client, I ask these basic questions in an effort to ferret out their financial purpose:
- What do you need to live the lifestyle you want? This is essentially asking what it is you really want to accomplish, beyond the basics of food and shelter. Only you can answer that.
- What are your fears and concerns about the future? Are you worried about your health? Are you concerned about financial security?
- Which relationships are important to you? Do you want to provide for the important people in your life?
- What are your interests? Do you like to travel, attend sporting events, go to plays or garden?
- What is your vision of a happy, healthy retirement? When you have a financial purpose, you can gain motivation, and hopefully, your outlook will be healthier.
What are your answers to these questions? Once you establish a purpose for your money, it will help guide you when it comes to investing, saving, making charitable donations and spending for the rest of your life.
Rozel Swain contributed to this article.
Alfie Tounjian has the CERTIFIED FINANCIAL PLANNER™ certification and is president of Advantage Retirement Group and Tounjian Advisory Group LLC. Alfie is an Investment Adviser Representative and insurance professional. He has been in the financial services industry for more than 30 years. He is author of the upcoming book “The Retirement Fairway” (available in early summer).
Investment Advisory Services offered through Tounjian Advisory Group, LLC, a Registered Investment Adviser.
-
Stock Market Today: Have We Seen the Bottom for Stocks?Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
-
Is the GOP Secretly Planning to Raise Taxes on the Rich?Tax Reform As high-stakes tax reform talks resume on Capitol Hill, questions are swirling about what Republicans and President Trump will do.
-
Social Security Is Taxable, But There Are WorkaroundsIf you're strategic about your retirement account withdrawals, you can potentially minimize the taxes you'll pay on your Social Security benefits.
-
Serious Medical Diagnosis? Four Financial Steps to TakeA serious medical diagnosis calls for updates of your financial, health care and estate plans as well as open conversations with those who'll fulfill your wishes.
-
To Stay on Track for Retirement, Consider Doing ThisWriting down your retirement and income plan in an investment policy statement can help you resist letting a bear market upend your retirement.
-
How to Make Changing Interest Rates Work for Your RetirementHigher (or lower) rates can be painful in some ways and helpful in others. The key is being prepared to take advantage of the situation.
-
Within Five Years of Retirement? Five Things to Do NowIf you're retiring in the next five years, your to-do list should contain some financial planning and, according to current retirees, a few life goals, too.
-
The Home Stretch: Seven Essential Steps for Pre-RetireesThe decade before retirement is the home stretch in the race to quit work — but there are crucial financial decisions to make before you reach the finish line.
-
Three Options for Retirees With Concentrated Stock PositionsIf a significant chunk of your portfolio is tied up in a single stock, you'll need to make sure it won't disrupt your retirement and legacy goals. Here's how.
-
Four Reasons It May Be Time to Shop for New InsuranceYou may be unhappy with your insurance for any number of reasons, so once you've decided to shop, what is appropriate (or inappropriate) timing?
