Making Your Money Last

To Define Your Retirement Goals, Take the Postcard Test

You've got to really know yourself to understand what's important to you, where you're going and how you can get there. A simple test could help shed some light on your path.

It all starts with a pack of postcards I bought on Amazon for five bucks. When I sit down with a new client, usually a married couple, I take out my postcards and lay them on the table. The exercise: Pick five of these that represent the life you want.

Beach, hammock, grandkids, cruise ship — these images are pretty common choices, but each comes with its own flavor.

One client wants to pay for his grandkids’ education; another wants to travel through the cathedrals of Italy; another wants to leave a vibrant, low-debt business for her longtime employees. Different stories for different clients.

These stories are dictated by values, which also influence our daily behavior. Our values make us who we are.

If your parents hammered away at the idea of being debt-free, you may have learned similar traits. Grow up in a traveling family, and you’ll probably invest in showing the world to your own kids. Watch your role models take pride in charitable giving, and you will probably follow suit as an adult.

These values are woven into who we are, and knowing what you value — which postcard you pick — is vital to your financial strategy.

Your values tell you why you act the way you do and how to optimize your plan for the future. Knowing your values will make your plan more “keepable.”

Know Who You Are

Do you find yourself shopping for the most cost-effective vehicle and the next day leaving on your second all-inclusive cruise that month? Do you find yourself counting pennies at mealtimes and clipping coupons for the grocery store, then the next day buying a vintage car (leather seat covers, of course) on impulse?

OK, maybe those are extreme examples, but where you save money and where you spend it comes down to your values, which are unique to you and may not make sense to others.

Know Who You Want to Be

“Aspirational values” tell you who you “aspire” to be. More than wishful thinking, they also tell you about yourself.

If you feel drawn to donate to a wildlife preservation group, even if you never have, you’re experiencing your values. Your aspirations, like giving to an eco-friendly cause, still paint a picture of who you are, and how you might want to invest.

By that same right, you will probably not want to invest in a company with slack environmental policies. By doing so, you’d experience discomfort from your values, which could make that investment more trouble than it’s worth in the long run.

Know What’s Possible

Knowing yourself can also help you plan for what’s possible. Some of us are natural savers, and some of us are natural spenders. As for me, I’m a natural spender, especially when it comes to relaxing with those I love or seeing a part of the world I’ve never explored. I know myself, and I know that I’ll splurge on that trip or that expensive meal, even when it might not be strategic to do so.

Knowing that about myself, one practical step I take is to set up automatic savings. With a few clicks, I automatically take a piece of my income and put it in savings, investments and retirement. I don’t even see the money, and (after a while) I don’t even feel the loss.

By understanding yourself, you have a hold on what’s realistic in your financial life. You know your faults and where to create an intentional outlet to express yourself financially.

If you know you’ll want a big celebration for your 20th anniversary, plan for it! Build the cruise or the lavish stay-cation into your budget for the year rather than overspending when the big day comes.

If you know you have a tendency to disregard distant future events like retirement, set up strict guidelines that will help you make this possible. Set up an automatic withdrawal from every check, put the money in a 401(k) that will be difficult to draw on, and budget from your take-home pay after all this is done, not from the salary on your job description.

Know Which Postcards You’d Pick

“Just making money” is an unreflective, oversimplified reason to work with your finances.

Over the long haul, your investments will reflect something deeper. Your values will show in how you spend and save, what makes you happy, and what keeps you up at night. It’s best that these financial values aren’t a surprise to you.

A values inventory can help clarify your core values, which in turn can help you develop a plan with an adviser. Values assessment tests range from the simple and free to the complex and expensive.

You are going to be you for a long time! Your long-term investment strategy should be based on your strengths, weaknesses and driving values.

The postcards I give my clients aren’t pictures of piles of money and ascending trendlines, they show families making memories, places you’ve never been, and people and causes in need. Your postcard choice reflects part of who you are, and the choices you make with your money should do the same.

About the Author

Erin Wood, CFP®, CRPC®

Senior Vice President, Financial Planning, Carson Group

Erin Wood is Vice President of Wealth Planning at Carson Group, where she develops strategies to help families achieve their financial goals. She holds Certified Financial Planner and Chartered Retirement Planning Counselor designations.

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