by Matt Brock, Divergent Planning (@matthewbbrock)
Financial planning is a very broad term. It can cover investments, savings, retirement, education, cash reserves, short term goals, long term goals... the list goes on and on. The sheer number of topics can seem overwhelming and lead many to throw their arms up and surrender. At the heart of it all is one important fact.
You must have a “reason” for all this planning.
Throughout this month we have talked about being intentional. Financial planning with intent is an important part of sticking with it. Often, people save haphazardly. Not just the types of accounts and investments but the amounts that are saved are chosen with no real reason in mind. The number one issue I see with individuals is not poor investment choices (most 401k’s have decent investment options), its lack of direction for the savings. This lack of direction also shows up in other areas of finances like spending and debt management.
Save with Intent
Investments are the vehicles to get what you want. Some people want a new car, some want a new house, some want an early retirement and some never plan to retire. It’s important to remember why you make decisions about where your money goes. If you are saving for a specific goal (short or long term), you must align your saving strategy with your particular goal. If you know your time frame for needing your money, invest based on that time frame. For example, if your goal is a year away, consider being conservative with how your money is invested but be aggressive with the amount you save. Don’t just save to save. Have a reason for saving.
Spend with Intent
Make sure you at least consider each expense you make. Don’t make yourself feel guilty for going to Starbucks, but at least think about the action of buying. This “cognizant spending” can have surprising psychological effects. You may even find yourself spending less without actually having to map out a budget. It has become far too easy for our minds to separate the act of swiping our credit card with the actual payment of a product or service. Using the “think twice before you spend” mentality is not meant to discourage buying things that make you happy but, it is meant to remind you of what else your money could be going toward that may make you happier (i.e. new car, new house, new business).
Live with Intent
As important as it is to save for your future self, do not neglect the happiness of your current self. Far too often, societal pressures make people feel guilty for spending money and living a lifestyle that makes them happy today. Obviously, I am not saying go all out and spend every dime you make and run up credit card debt. What I am saying is that there exists a happy balance between preparing for the future and living for today. What is the point of saving a million bucks if you are not happy along the way?
Die with Intent
A little morbid, I know. But, it’s important to have a real conversation with yourself about what you would want to happen if you were to die. Who would you want taken care of? What would you like see happen with your money? Your kids? Your family? It’s not fun to think or talk about these things but it should be a conversation you have with yourself every so often. Having your legal documents in order can ensure your intentions are carried through after life.
Are your financial actions reflecting your true intent?
