What is Your ‘Why’ and Does Your Financial Plan Reflect It?

Kyle Larson, CFP®

Oct 5, 2020

How can such a small, three-lettered word elicit such existential confusion, yet be one of the most important questions you ask yourself? That word, of course, is “why.” We’re accustomed to asking others this question, but when was the last time you asked yourself “Why?” I don’t mean “Why did I waste an hour watching Netflix?” or “Why did I order the green curry instead of the red?” but rather “Why do I get up every day to do what I do?” or “Why am I sacrificing now?” These questions require time and focus to answer, but we believe that understanding your “why” is critical if you want to live a purpose-filled life. We also believe that your financial plan should reflect your “why.” Let’s explore where philosophy and practicality meet, specifically relating to your savings plan.

Figure Out The ‘Why’ Behind Your Financial Goals

Simon Sinek’s famous 2009 TED Talk, “Start With Why,” asked this very question. He notes that the majority of people and businesses fail to identify their true “why” and instead settle for superficial motivations like profit or happiness. Rather, he asks us to consider spending the time identifying our “why” first so that our actions become manifestations of our “why.” What an inspirational way to live life! Apply that one step further to your own savings plan. Are you saving because you simply know it is the “right thing to do” or do you have a clear purpose in mind driving that decision? We recommend expanding upon this for two reasons:

  1. You will be more motivated to continue saving if it is directly linked to your values and goals.
  2. The intended use of your savings should drive quantitative investment decisions.

Let us start with the savings going into your retirement account. First, if you’re contributing anything to your retirement account, you should be commended. Have you thought about what that simple action could mean for you and your family if maintained for the rest of your career? Instead of saving because it is the “right thing to do,” what about saving because it will allow you to retire early at age 60, spend 15% more than you do now and generously support your favorite charity? Or, so that you can be available to watch your grandkids, volunteer or travel to a new country each year. Maybe you desire a home in which you can raise a family and build relationships in your community. These examples might not be at the top of your list, but that is the beauty of your “why,” you get to decide what the goal is.

Save Now for a Reward Tomorrow

Knowing your “why” helps ease the pain of today’s sacrifice for tomorrow’s reward. Let’s face it, saving money isn’t necessarily fun, nor is it particularly easy to do. It turns out that my parents (and surely many of yours as well) were right when they said, “Money doesn’t grow on trees.” Each of us has limited resources and we are inundated with demands for our money. To have a healthy retirement nest egg you need to save a significant portion of your income for decades. Given that following a diet or going to the gym for more than a few days is a struggle for most, it is no wonder that the vast majority of Americans are severely underprepared for retirement. Reaching your financial goals is a decades-long marathon, it is important to stay the course and follow a disciplined strategy. If you can align your actions with your “why” and stay focused, you are significantly more likely to conquer the race.

The Value of Knowing Your ‘Why’

From a quantitative perspective, your “why” is incredibly valuable in maximizing the impact of your hard-earned dollars. Think about your savings account. Is it a hodgepodge of your emergency fund, future home down payment and college fund? Are you consistently adding the specific dollar amount needed to put you on track for each of those goals, or simply whatever is left over each month? Given the scarcity of our resources, you need to be thoughtful about how you position your hard-earned dollars to maximize the likelihood that you will reach your goals. Instead of keeping all the money in your savings account with no opportunity for growth, you could open a 529 plan for those future college expenses. That money will grow tax-free, you might get a small tax deduction and your child will have more money available to pay for college expenses. For your future home down payment, you could invest conservatively knowing that every additional dollar will help lower your mortgage payment. These are very simple examples of ways we help people realign their resources with their values and goals.

You Don’t Have to Find Your Why on Your Own

Defining your “why” seems abstract now and I do not mean to suggest that defining it is easy. The reward will be both fulfilling and financially beneficial, even though retirement might still be 30 years away. Even still, we encourage you to try and define your “why” because positioning yourself correctly now will enable you to better influence your future.

The good news is that your job is not to figure all of this out on your own. You have enough on your plate. Your job is to invest the time thinking and talking about the life you want for you and your family. Bring that to us or, better yet, let us help you explore these goals and we will work together to make sure they happen. Financial planning is a marathon and without your “why” in mind you might be neglecting the big picture, finishing as strongly as possible. Our goal at TCI is to empower purpose-filled lives, whatever that means to you. That is our “why” and we are here to help you figure out yours.

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