The point and purpose of “financial purpose”
I’ve written about how it’s easier to plan and make the most of your money if you have a clear purpose for your life. Talking about “financial purpose” can seem “fluffy” to some people and I’ve gotten my fair share of eyerolls over the years. One gentleman essentially told me, “I hire an advisor to help me have more money. I’ll handle my values separately” (see our exact exchange below.)
I get it, but here’s the thing, you can’t separate your values from your financial decisions. Here was my response:
“Why do you work? Why are you still working? Why do you spend your time the way you do? Why do you live where you live? Drive what you drive? Donate where you donate? How did you decide to pay (or not pay) for your kids' education? Where do you want your money to go when you die? Why?
You see, purpose isn’t fluff. It’s the logical way to live. Blindly wanting “more” is a fool's game. If I give you $1, you now have more money. Are you satisfied? Obviously not. While it’s clear at the extremes (you’re probably not satisfied with $1, and probably are satisfied with $1 Billion) it’s less clear in the murky middle.
The point of financial planning is to make the most of your money and to make the most of your money requires you to make a series of choices/decisions/tradeoffs about how much to spend or not spend (save), what to invest in, how much insurance to buy, etc. Having a clear purpose makes this process infinitely easier. It makes it easier to cut back on things that aren’t important to you and removes the guilt of spending money on things that are important to you.
Now, I understand people don’t know what they want in life, and you don’t have to be so exact (e.g., retire at 61 and move to McKinney, TX and live at 123 Main Street and play golf two times a week at XYZ Country Club.) That’s nice, but that’s going to change. No, purpose is bigger picture than that. For me, my financial purpose is to “always be there for the kids while not worrying about money.” As I said, this means cutting back in some areas and spending lavishly in others. It means investing aggressively for long-term goals, and being conservative with short-term money. These cutbacks aren’t “painful” because they’re in pursuit of a more important goal and I don’t regret spending a lot of money on things I know I will remember and treasure for the rest of my life.
Having a clear purpose is really about being intentional. The most important resources in life—time, money, attention, and energy—are finite. To me, there’s nothing sadder than spending these resources on things you don’t want or need, which puts you further from what you do want or need. This is what happens in the absence of intent, and what doesn’t happen when you start pursuing your purpose.
How do you determine your purpose? Read on.
