MONEY Financial Planning

Financial Advice Is Good, but Emotional Well-Being Is Better

On the surface, good financial planners help you manage your money. Dig down deeper, though, and they're improving your emotional life.

On the surface, comprehensive financial planners provide advice and services in areas such as investments, retirement, cash flow, and asset protection.

We need to drill deeper, however, to get at a planning firm’s core purpose. After exploring this question over recent months, my staff and I have agreed that our core purpose is to transform the financial and emotional well-being of people. That’s the part of our work that gets us out of bed in the morning.

Here’s a closer look at the three key words of that purpose:

  • Transform: To achieve long-term financial health, people often need to transform their relationship with money by making permanent changes in their attitudes, beliefs, and behaviors. An example of transformation might be someone learning to reframe a money script that has blocked their ability to save for the future.
  • Well-being: This is a multidimensional word that includes financial, emotional, and physical aspects of people’s lives. Our purpose focuses on both the financial and emotional aspects. Since some 90% of all financial decisions are made emotionally, separating financial and emotional well-being is almost impossible.
  • People: By referring to “people” rather than “clients,” we acknowledge that, in order to foster transformation and well-being for our clients, we also need to be concerned about the well-being of all the members of our staff.

Once a firm has defined its core purpose — the “what” — the next step is to create a framework of principles to accomplish that purpose. This is the “how” that guides the operations of the company. The principles might be something like the following:

We…

  • Put clients first.
  • Guide people to reach a destination in an unfamiliar area.
  • Give sound advice and creative solutions.
  • Constantly educate ourselves.
  • Practice what we preach.
  • Are serial innovators.

Finally, behind the “what” and “how” of what a firm does is the “why.” These are the core values, the touchstone that brings everyone in the company together and forms the basis of the company’s culture. These values are non-negotiable. Even though a company’s purpose or principles may change over time, the values will stay the same. Core values might include:

  • Trust. Our work and personal interactions are based on real, unquestionable evidence, reliability, and trustworthiness.
  • Unbiased Advocacy. We are defenders, supporters, and interceders on behalf of our clients and one another.
  • Well-Being. Everything we do is in support of achieving and maintaining, for our clients and one another, a state of being happy, healthy, and prosperous.
  • Continuous Improvement. We focus on improving our processes, our client experience, and ourselves.

In defining the core purpose for a comprehensive financial planning firm, it’s essential to appreciate the importance of both financial health and the well-being it supports. One can’t have well-being without the financial means to support physical health and emotional happiness.

This is why our firm defines its purpose as transforming people’s financial and emotional well-being. This core purpose is based on the belief that comprehensive financial planning goes beyond building financial independence. It also helps clients and staff members change destructive money behaviors, clarify goals, and achieve the dreams that represent happiness to them. In the broadest sense, real financial planning offers investment advice that supports people’s investment in their own well-being.

———-

Rick Kahler, ChFC, is president of Kahler Financial Group, a fee-only financial planning firm. His work and research regarding the integration of financial planning and psychology has been featured or cited in scores of broadcast media, periodicals and books. He is a co-author of four books on financial planning and therapy. He is a faculty member at Golden Gate University and the former president of the Financial Therapy Association.

MONEY Budgeting

How to Start Tracking Your Spending in 7 Minutes Flat

stopwatch with money/dollar on it
George Diebold—Getty Images

If you want to save more or get out of debt, knowing where your money goes now is an essential first step.

As part of our 10-day series on Total Financial Fitness, we’ve developed six quick workouts, inspired by the popular exercise plan that takes just seven minutes a day. Each will help kick your finances into shape in no time at all. Today: The 7-Minute Spending Tracker

Seven minutes is a little tight to create a budget, but it’s enough to tackle the first step: pulling together all your spending info using a budgeting tool such as Mint. You’ll need your credit and debit cards to get started.

0:00 Surf to Mint.com and register for a free account.

0:42 Mint asks for your credit card providers and bank. As you type in each one, a list of possible matches will pop up. Select the right one and enter the online login and password you use for that account. (Mint is a secure site and cannot get to your money.)

3:02 Mint will need a minute to pull in all of your transactions, which it automatically slots into categories like “Cellphone” and “Groceries.” Problem is, the app doesn’t always get it right. To fix that, click the “Transactions” tab.

3:34 See those “uncategorized” charges? You can select them to choose a correct label. This is pretty tedious, so tick the box that says “always re-categorize X as Y.” That way, Mint will put all future transactions from that retailer in the right place.

5:02 When you did that, you probably also noticed some charges Mint tried to identify but placed into the wrong bucket. Scroll through those and correct them the same way.

6:30 Grab your phone and download the Mint app. Having the program handy will help you keep on top of charges.

7:00 Now you’re ready to click the “Budgets” tab and create a spending plan. For more help with that, check out our Money 101 stories on creating a budget you can stick to and setting financial priorities.

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  • Day 6: Cut the Fat From Your Budget
  • Day 7: Find Ways to Save More
  • Day 8: Boost Your Earning Power
  • Day 9: Learn How Better Health Can Help Your Finances
  • Day 10: Shore Up Your Safety Net
MONEY Love and Money

A 3-Step Plan for Avoiding Money Arguments

black and white chess pieces on top of stack of money on chessboard
Hitoshi Michael—iStock

It's normal for couples to have disagreements about money. Here's a guide to overcoming them.

The last really big money fight my wife and I had was about a vacation. Yes, after 23 years of marriage, the very thing that was meant to bring joy to our lives was causing each of us to seriously question whether we had married the right person.

Since I’ve spent my entire career helping people with their finances, you might think that I would be a good person to talk to about money. Unfortunately, this wasn’t true for my wife.

But is it any surprise that a big decision with significant financial implications can lead to a heated conversation? After all, how you spend money is deeply personal, because it is an expression of what you value.

So how can people make the best decisions together when they come to those decisions with different values?

This question is more complex than it seems, because seldom are big decisions simply economic and intellectual. They usually have emotional implications. And three major obstacles get in the way of making sound money choices: One, we are all biased in our perspective about money. Two, we feel like we are right even if the facts disagree with us. And three, deferring a discussion about money with a loved one can frustrate us, leading to an explosion over a seemingly small issue.

Here’s a three-step plan to help you the next time you and someone close to you have to make a big money decision:

1. Know your biases.

I am a protector. I grew up in Zimbabwe, Africa, in an environment of scarcity and need. I worked from age 11 to have money. My wife grew up in Los Angeles with a very different life, one with financial stability. She is a giver and a pleasure seeker. I want money to give me security; she wants money to share with family and to enjoy life. I concentrate on the cost of things; she thinks more about the enjoyment something can bring. There’s no right or wrong way to view money, but it definitely affects how we think and feel about financial choices. When it came to our vacation, she wanted it to be longer than I felt was prudent. We both felt strongly about our perspectives. Knowing what biases we each bring to a financial decision helps us to take a more balanced approach. My firm’s Money Mind Analyzer tool can help you and your partner understand your money personalities.

2. Look for a compromise rather than a choice.

When it comes to money conversations, we often decide a firm choice has to be made. What we are really making, however, is a tradeoff between different preferences. Emotions are natural when it comes to big decisions, but they can lead to real lasting frustration. Why? Because they often end with one person convincing the other to “see it my way.” But the best answer is often a compromise of perspectives. I tend to be the more outspoken person, and that simply wasn’t fair to my wife. She was rightly frustrated at not having her voice or opinions heard. So look for the middle ground where you can both win a little.

3. Have a disciplined process.

One of the best pieces of advice I have ever been given is to have scheduled meetings with my spouse to discuss life and our choices. Having the right mindset can change everything. We have a weekly meeting now with a list of things we need to jointly decide. We have rules, like staying calm and hearing each other’s perspective. We also use a checklist whenever we have a big decision to make. Ready to start holding regular meetings to discuss important financial matters? You can use a checklist our firm has developed to help people come to an agreement about a big decision.

There is no magic to living a great financial life. It’s all about your choices and how you make them. If you are on the voyage with someone else, then finding a positive way to decide together will make your life meaningfully better.

After that big fight about that family vacation, my wife and I decided that we had to find a different way. We still have different perspectives and passionate disagreements, but we usually find a middle ground where we each feel heard and both our needs are considered. One of the side benefits is that our three daughters get to see how we make financial choices — something neither of us got to see our parents do.

By the way, the vacation to Italy was great, and a little longer than I would have planned. I am eternally grateful to my wife for those extra few days I had fought against staying for.

———-

Joe Duran, CFA, is CEO and founder of United Capital. He believes that the only way to improve people’s lives is to design a disciplined process that offers investors a true understanding about how the choices they make affect their financial lives. Duran is a three-time author; his latest book is The Money Code: Improve Your Entire Financial Life Right Now.

MONEY Saving & Budgeting

4 Ways to Hit Your Money Goals

150218_FIT_MOTIVATION
Gregory Reid

It's one thing to know that you need to save more money, find a better job, or pay down debt. It's another thing to actually do it. Employ these strategies to stay on track.

Welcome to Day 2 of MONEY’s 10-day Financial Fitness program. Yesterday, you did a self-assessment to see what kind of financial shape you’re in. Today, we help you find the motivation to take your finances to the next level.

Okay, you’ve checked your vitals, and you’re probably feeling pretty good about your starting point. According to Gallup’s annual Personal Financial Situation survey, 56% of people in households earning $75,000 or more say they are better off financially now than they were a year ago, up from 44% who felt that way in January 2014.

But just as even the most devoted gym-goer can get complacent, your financial confidence could stop you from reaching the next level. “In good economic times people save less and spend more,” says Dan Geller, a behavioral finance expert and the author of Money Anxiety. Keep the eye of the tiger even when you’re doing great. Here’s how.

1. Make a Specific Goal

When you show up at the gym without a plan, there’s a good chance you’ll shuffle on the treadmill for a half-hour and call it a day. Your financial life is no different. To boost your performance, start by zeroing in on a goal. A study by Gail Matthews, a psychology professor at Dominican University, found that you’re 42% more likely to achieve your aims just by writing them down. Indeed, people with a written financial plan save more than twice as much as those without a plan, says a Wells Fargo survey. The more specific the goal, the easier it is to tackle. Rather than plan to “cut costs,” focus on, say, paying off your mortgage five years early.

2. Buddy Up

Much as a workout partner provides motivation to get to the gym, recruiting a family member or friend to hold you accountable is a good way to stay on track. In another study by Matthews, some participants shared their goals with a friend via weekly updates—achieving their aims 33% more often than those who did not.

3. Get a Nudge

Sometimes you just need a reminder. A study by the Center for Retirement Research found that bank account holders who got reminders about their savings goals put away more cash than people who didn’t. It’s easy to set recurring calendar reminders on your PC or phone, or try a service like FollowUpThen.com, which lets you schedule emails to your future self.

4. Stickk It

Need something with more teeth? The website Stickk.com allows you to pledge a sum of money toward a goal, sign a commitment contract, and pick a friend to monitor your progress. Achieve your aim, and you get the money back. Miss it, and you lose the money, which is donated to charity or a friend.

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MONEY retirement planning

What Women Can Do to Increase their Retirement Confidence

150212_FF_WOMENDONTTALK
Izabela Habur—Getty Images

Knowing how much to save and how to invest can help women feel more secure. Here's a cheat sheet.

Half of women report feeling worried about having enough money to last through retirement, according to a new survey from Fidelity Investments of 1,542 women with retirement plans.

Those anxieties aren’t necessarily misplaced either.

Women have longer projected lifespans than men and even if married, are likely to spend at least a portion of their older years alone due to widowhood.

“So they need larger pots of money to ensure they won’t outlive their savings,” says Kathy Murphy, president of personal investing at Fidelity.

Earlier research by the company found that while women save more on average for retirement (socking away an average 8.3% of their salary in 401(k)s vs. 7.9% for men) they typically earn two-thirds of what men do and thus have smaller retirement account balances ($63,700 versus $95,800 for men).

Also, while women are more disciplined long term investors who are less likely than men to time the market, women are also more reluctant to take risk with their portfolios, says Murphy.

“And if you invest too conservatively for your age and your time horizon, that money isn’t working hard enough for you,” she adds.

How Women Can Increase their Confidence

Financial education can help women reduce the confidence gap, and get to the finish line better prepared, says Murphy.

According to the Fidelity survey, some 92% of women say they want to learn more about financial planning. And there’s a lot you can do for free to educate yourself, notes Murphy. As an example, she notes that many employers now offer investing webinars and workshops for 401(k) participants.

You might also start by reading Money’s Ultimate Guide to Retirement for the least you need to know about retirement planning, in digestible chunks of plain English. In particular, you might check out the piece on figuring out the right mix of stocks and bonds, to help you determine if you’re being too risk averse.

Also, simply calculating how much you need to save for the retirement you want—using tools like T. Rowe Price’s Retirement Income Planner—can help you make plans and feel more secure.

The 10-minute exercise can have a powerful payoff: The Employee Benefit Research Institute regularly finds in its annual Retirement Confidence Index that people who even do a quick estimate have a much better handle on how much they need to save and are more confident about their money situation. Also, according to research by Georgetown University econ professor Annamaria Lusardi, who is also academic director of the university’s Global Financial Literacy Excellence Center, people who plan for retirement end up with three times the amount of wealth as non-planners.

Says Murphy, “We need to let women in on the secret that investing isn’t that hard.”

More from Money.com’s Ultimate Guide to Retirement:

MONEY Financial Planning

10 Days to Total Financial Fitness

Bench press with gold painted weights
Gregory Reid

Beginning today, MONEY kicks off a 10-day program designed to pump up your finances for 2015. Before you can get started, though, you need to see what kind of shape you're in. 

When you think about what kind of shape your finances are in nowadays, you may be feeling downright buff. Retirement plan balances are at record highs, home prices are back to pre-recession levels in most parts of the U.S., and the job market is the strongest it’s been since 2006.

No wonder Americans are more optimistic about their finances.

Given that, it’s understandable that some bad habits may be creeping back into your routine. Americans, overall, are slipping into a few: Household debt is at a record high, fueled by an uptick in borrowing for cars and college and more credit card spending. Vanguard reports that investors are taking risks last seen in the pre-crash years of 1999 and 2007.

What’s more, the financial regimen that’s been working well for you of late may not cut it anymore. In this slow-growth, low-interest-rate environment, both stock and bond returns are expected to be below average for several years to come.

To pump up your finances in 2015, you need to shake up your routine. The plan that follows can help you do just that. Every day for the next two weeks, we’ll target-train you for a different financial strength. This program includes seven quick workouts, inspired by the popular exercise plan that takes just seven minutes a day, that will push you to raise your game in no time at all. What are you waiting for?

See What Shape You’re In

Even if you’re a dedicated exerciser, you could be ignoring whole muscle groups, leaving yourself susceptible to injury. For example, 39% of people earning more than $75,000 a year wouldn’t be able to cover a $1,000 unexpected expense from savings, according to a 2014 Bankrate survey. So the first step is to establish your baseline by asking yourself these questions.

How are my vital signs? Tick off the basics: Check your credit, tally up your emergency fund (aim for six months of living expenses), look at how much you are contributing to your retirement plans, and get a handle on how you’re splitting up your savings between stocks and bonds.

Less than half of workers have tried to calculate how much money they’ll need for retirement, EBRI’s 2014 Retirement Confidence Survey found. Take five minutes to use an online tool that will show you if you’re on track, such as the T. Rowe Price Retirement Income Calculator.

What’s my day-to-day routine? The very first thing Rochester, N.Y., CPA David Young does with his clients is go over their spending. Budgeting apps, he notes, “make the invisible credit card charges visible.” As important as the “how much” is the “on what,” says Fred Taylor, president of Northstar Investment Advisors in Denver. Divide your expenses into the essential costs of living, investments in your future (savings, education, a home), and the discretionary spending you have the flexibility to cut.

Am I juicing my finances too much? In other words, how toxic is your borrowing? Your total debt matters. But the kinds of debts you have and the implications for your future are crucial too, says Charles Farrell, author of Your Money Ratios and CEO of Northstar. As a young saver, you shouldn’t be worried about high debts due to a house and education, Farrell says, as long as you can handle the payment, will be debt-free by your sixties, and are using debt only to fund investments in a low-cost or high-earning future, such as a low-maintenance home or new job skills. Farrell suggests in your twenties and thirties you should limit total mortgage debt to less than twice your family income. In your fifties, you should have a mortgage no higher than what you make. At any age, total education debt should not exceed 75% of your pay.

What’s my biggest weak spot? You need to guard against familiar risks, like insufficient insurance. But David Blanchett, head of retirement research for Morning-star, says you should also think about less obvious threats. Will new technology put your livelihood at risk? Are you counting on a pension from a financially shaky firm? Do you live in an area, such as Northern California, where home values hinge on the success of one industry?

Once you know how much progress you’ve made so far and what areas need the most work, you’re ready to get going on your financial fitness plan.

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MONEY retirement income

Forget About Retirement Planning for Millennials

piggy bank with locks for earrings
YAY Media AS—Alamy

The goal of achieving financial independence is more appealing than the idea of saving for a retirement that's decades away.

When it comes to millennials and money, many financial planners are focusing on the wrong issue.

The retirement advice most financial professionals provide was designed for Baby Boomers. Gen Y’s situation, however, looks nothing like this 30-year-old norm.

Few members of Gen Y get excited about the idea of working for the next 40 to 50 years, doing all the heavy lifting when it comes to ensuring they’ll have enough savings for the future, and then retiring to a life of no work and no purpose shortly before expiring.

Yet traditional retirement planning asks people to do just that. This doesn’t make sense for millennials — but that doesn’t mean they should throw their financial security to the wind and have no plan at all, either.

Instead, we planners should shift the focus from the nebulous concept of “retirement” to something concrete and accessible. It should be something that millennials can take real action to achieve in the short-term, not something that won’t matter for 40 years.

We should focus on preparing Gen Y for financial independence.

What Is Financial Independence?

Financial independence refers to a situation where an individual can generate enough income to pay all expenses for the rest of his or her life. Typically, that refers to passive income that comes from savings and investments, but it might also come from a side business, real estate assets, or royalties from past work.

Financial independence frees individuals from the obligation to work a particular job in order to secure a specific paycheck. It’s possible when you’re in your 20s to start building the income streams that will meet your needs for life and help you reach independence. Creating a side job that earns $500 a month today could build to provide $1,000 a month in a few years and $2,000 a month in five or 10 years.

Don’t believe it? You must not get around the blogosphere much.

Financial bloggers — not advisers or planners — have been championing this concept for years. The idea of financial independence is gaining traction thanks to bloggers popularizing it — and succeeding at it themselves.

One example: Mr. Money Mustache, a financial blog run by a man who reached financial independence in his 30s. By investing 50% to 75% of his income during his working career in his 20s and early 30s, he reached financial independence before 40.

Other bloggers have reached financial independence by building and selling a business or investing in multiple real estate properties that generate monthly income.

But the most popular way is probably the most accessible: save huge percentages of income. Bloggers, even the ones not as Internet-famous as Mr. Money Mustache, frequently report saving anywhere between 30% and 70% or more of their income. The majority of this group then invests that money in inexpensive, passively-managed index funds.

They don’t need $1 million to $3 million in the bank when they’re 63 years old. Instead, they may need to reach an investment goal of $250,000 or $500,000 in assets before they can start withdrawing 3-4%, because along with other income streams this is enough to cover their expenses each year for life.

Why Financial Independence Is the Financial Planning Answer for Gen Y

Financial independence makes sense for Gen Y because it’s more realistic, and it’s something that people don’t have to wait until they’re 60 or 70 years old to achieve.

Building income streams allows individuals to achieve financial independence within years, if those income streams are sound and stable. Even working toward financial independence via saving and investing can be accomplished in a fraction of the time it normally takes people to achieve retirement goals. Invest 50% of your income, for example, and you’ll reach financial independence in 17 years; save 75% and you’ll be there in 7 years.

And financial independence allows you to experience the kind of freedom that “retirement” does not. Free from the obligation of working a job because it’s necessary to pay bills allows financially independent people to explore new work, projects, businesses, and opportunities. It enables individuals to try new hobbies or go new places that old age and ill health may eliminate in traditional retirement after a decades-long working career.

We shouldn’t focus on traditional retirement planning for millennials. Instead, let’s give them the tools and knowledge they need to reach financial independence.

———-

Alan Moore, CFP, is the co-founder of the XY Planning Network, where he helps advisers create fee-only financial planning firms that specialize in working with Generation X & Generation Y clients.

MONEY Benefits

The Treasures Hidden in Employee Benefits

businessman with treasure chest of gold coins
Machine Headz—iStock

People often don't realize that they're missing out on valuable employee benefits. Here's how one planner helps them get what's theirs.

I’m talking with a client, Sarah, about her work benefits.

“Are you signed up for disability insurance through work?” I ask. Since Sarah, who’s in her 30s, has at least 25 years until retirement, this insurance is a very important component of her financial plan.

Sarah says she thinks she is.

“Great,” I say. “How long is the waiting period on that, and what percentage of your salary is covered?”

Sarah responds with a big “Ummmm, I have no idea.”

This discussion is actually much more common than you might think. Life gets busy. When open enrollment happened, Sarah checked the boxes on her benefits form without really understanding what she was looking at. Then she moved on with her life. What’s the harm in that?

The harm is that if she hasn’t closely reviewed her employee benefits, she may have a false sense of safety. She may not have checked the right boxes. Her coverage may have major gaps or important conditions of which she’s not aware.

As a financial planner who specializes in working with Gen X professionals, I perform a comprehensive review of my client’s employee benefits as part of his or her financial plan. I can quickly identify potential gaps in insurance coverage, or tax-saving accounts that she or he is not taking advantage of.

Not every financial planning firm does this. Some advisers think that the client already has it under control. Some advisers put a majority of their focus on investment management, and maybe they don’t think they have time to review outside information. This is a mistake.

Here’s the problem: What you don’t know can hurt you. A client may think she has disability insurance through work, but what if she never actually signed up? She suddenly gets diagnosed with cancer and can’t work. Then she misses out on the 50%-60% of the monthly paycheck that employer-provided disability plans often provide. So now she’s dealing with both the stress of cancer treatments and the challenge of paying for living expenses no longer covered by her income. And her adviser has failed her.

A review of employee benefits doesn’t have to take long. Here are the steps I take with my clients:

  1. My client sends me either the employer benefits summary or screenshots from his or her employer benefits website.
  2. I look at the retirement plan. Is it pre-tax only, or is there an option to do Roth 401(k) or Roth 403(b) contributions? What is the employer matching formula? If the client is behind on saving for retirement, is there room to increase contributions before hitting the IRS-mandated maximum?
  3. Next, I review the disability insurance information. Is there long-term disability insurance offered? If so, is the client currently signed up for it? Is there an option to increase the coverage for a little more money? What is the waiting period? Does the employer or the employee pay the premiums (affecting whether the benefits are taxable)?
  4. I review the life insurance benefits. What is basic included coverage? If the client doesn’t have enough insurance, is there an option to increase the coverage? Does that option require medical underwriting or can he or she increase coverage without a medical exam?
  5. I make sure that the client is signed up for the health insurance plan that makes the most sense for him or her. Sometimes it’s better for spouses to be on the same health insurance policy instead of separate ones through their respective employers. Would the client benefit from doing a high-deductible plan (an attractive choice if the client is in good health)?
  6. Finally, I review the tax-advantaged savings account (usually a Health Savings Account or a health Flexible Spending Arrangement and a childcare FSA) to see if there are any benefits that we could be using, and I check the other benefits (like tuition reimbursement and pre-paid legal services) to see if there is anything else that could save my client money.

Once I report my recommendations to my clients, I find that they really appreciate that I am looking out for their best interests. And it gives them another reason to stick around.

———-

Katie Brewer, CFP, is the president of Your Richest Life, where she works virtually with Gen X professionals, helping them create and stick to a financial roadmap to live their richest life. Katie is a fee-only planner, a founding member of the XY Planning Network, and a member of the Financial Planning Association.

MONEY financial advice

When Money Isn’t the Top Priority

Sometimes the right decision from the financial perspective is the wrong one from the human perspective.

As a financial planner, I sometimes have a tendency to look at personal finance as a matter of checking off boxes.

Emergency fund? Check. Budget? Check. Saving for retirement? No? Well there’s the hole. Let’s start right there.

There’s some value in that kind of thinking. After all, certain things are just good practice and running through that checklist is a good way to get a quick read on someone’s financial situation.

But I also remind myself to not take that mentality too far. I try to remember that good financial planning is really about helping my clients build a life they enjoy, and that money is just a tool that can help make that life possible.

Which means that sometimes the “correct” decision from a financial standpoint is not actually the correct decision. Sometimes happiness needs to take precedence.

I worked with a young couple recently who were about to have their second child. Like I do with all clients, I asked them right at the start why they were coming to me. What was it they wanted to achieve?

They told me that they wanted to make sure they were saving enough for retirement. They wanted to save for a new house with a bigger yard. They wanted to make sure they had the right insurance in place.

But what they really wanted was to see if they could make their budget work so that the wife could stay home with the kids. She felt like she was missing out on this once-in-a-lifetime opportunity, and they thought they might be in a position to make it work. So they came to me.

As I reviewed their situation, one thing was immediately clear: From a purely financial standpoint, switching to a single income was going to be a step backwards. The wife had a stable job, made good money with good company benefits, and it was going to be more difficult for them to reach some of their long-term goals without her income.

We talked about all of those things at our next meeting. I wanted them to make an informed decision (as did they), so it was important for them to know what they would be giving up.

But I also showed them how they could make it work with just the one income. We talked about some changes to their budget that would make it easier, and we planted the seeds of a plan to get some of their other savings back on track over the next few years.

I also shared my personal story with them. My wife quit her job when we had our first child, and it was a financial hit. But it was the lifestyle we wanted, and over the years we’ve found ways to compensate.

In the end, they decided to give it a shot. They knew exactly what kind of financial sacrifices they were making, but they also knew what kind of lifestyle they wanted. And if they could make the finances work around that lifestyle, that was the route they wanted to take.

We all make decisions every day to put happiness ahead of money. We eat dinner with our family instead of in front of our laptop catching up on work. We take our spouses on dates, go out with friends, and go on vacations. These are the moments that make our lives meaningful. They are the reason we care about money in the first place.

As I work with clients now, I try to remember that my job isn’t to help them check off all the right financial boxes. My job is to help them use their money to build a happy life.

Life, not money, is the real priority.

———-

Matt Becker is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents build a better financial future for their families. His free book, The New Family Financial Road Map, guides parents through the most important financial decisions that come with starting a family. Becker is a member of the XY Planning Network.

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