Everything starts with a plan. I always describe myself as a financial planner, not a financial adviser. The reason for that (among other things) is that I believe that planning comes first before action. Otherwise how do we know whether or not our actions are correctly directed? Only when we have something of a direction in place, can we take the first step.
Planning usually starts with the end in mind, by which I mean we need to define what success means. That can be in terms of achievement, like taking that big, expensive holiday in a few years or helping your daughter get on the housing ladder with a deposit.
Or it can mean that life looks a certain way, like you live to a certain budget, or always change the car every three years, or you find time to volunteer for a project which is important to you.
If you want to identify what is important to you, look no further than the three Kinder Questions, developed by financial planner George Kinder. I’ll read them out now, but for a bit more detail around them, you can listen back to Season 4 episode 2. Are you ready? Here’s the first questions:
- Imagine you are financially secure, that you have enough money to take care of your needs, now and in the future. How would you live your life? Would you change anything? Let yourself go. Don’t hold back on your dreams. Describe a life that is complete and richly yours.
Now if you’re retired, then the ‘imagine you are financially secure’ part of that question is interesting. The question essentially assumes unlimited funds, and that’s probably not the case. If you’re not retired yet and are still accumulating you might think this through differently than if you are already drawing from your accumulated wealth.
The question is designed to free you of constraints and design an ideal life, but maybe you can do that even with the constraints you find yourself in at the cusp of retirement. I think this is arguably the question to focus on the least in this context.
- Now imagine that you visit your doctor, who tells you that you have only 5-10 years to live. You won’t ever feel sick, but you will have no notice of the moment of your death. What will you do in the time you have remaining? Will you change your life and how will you do it? (Note that this question does not assume unlimited funds).
Might be 5-10 years, might be 20-25, who knows. Most retired folks are aware of their mortality, more so than younger people very often. So this question will definitely help you to identify the more important things in your life and highlight any changes you might need to make.
- Finally, imagine that your doctor shocks you with the news that you only have 24 hours to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What did you miss? Who did you not get to be? What did you not get to do?
This is where things really get serious, obviously. This is about highlighting regrets before they become regrets. The answers to this question should help you to make changes now to ensure that the regrets you felt never come to be.
These are questions I keep coming back to because they really do focus the mind. And from that, planning is the natural next step. What do we need to do in light of the questions? What do we need to fix? And from there of course, come the very next steps we need to take.
I’ve covered planning in some detail in past episodes, and particularly in Season 15. Even though that season was aimed at those in the accumulation stage of their financial lives, there are still lots of things to carry over if you’re retired already. Planning should identify next steps and things you need to do.
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