Financial Planning is Lifestyle Planning, No?

Many of you maybe confused by lifestyle and financial planning. The financial services industry, through advisors, planners and brokers have for years helped customers save money for their retirement. They provide suggestions on investments look at your risk tolerance, asset mix, help you budget, with the goal of financial independence when you retire. That is a wonderful and noble goal but are you really prepared for the “blank sheet of paper” that is your life for the next 20+ years? We call the years after work where you have the health to do what you want your Victory Lap (VL). As my mother use to say “Money does not buy you happiness” so you need a lifestyle plan.

First let me say that financial planning is very important and should start very early in your working life. That seems like rationale advice however depending on which study you look at only about 1/3 of people have a financial plan. If you are in the majority and you have not yet retired than get some help and get a financial plan, no matter what you decide to do with your VL, it will be better with financial independence.

Historically financial advisors have done a wonderful job of helping you understand the math behind your retirement, if you earn $x now, you will need $y in your retirement. They will review how your cash flow will change in VL, no more commuting costs, no need to buy lunch everyday, Tim Horton’s share price will drop without your daily contribution, etc., your salary will be replaced by your investment portfolio, your pension, if you are lucky enough to have one, and government plans and all this will give you a comfortable retirement, Right?

Well, all this planning and advice is good but as we say in our book, and if you haven’t read it yet what are you waiting for, there is a gap in this planning as it is not looking at how you are going to spend your time in VL. Not planning for how you will spend your time will impact the math and assumptions you make in your financial plan. This may sound obvious, but historically financial planning was a mathematical exercise based on a traditional view of retirement, which was work 30 years, stop working, and head off into the sunset with a gold watch. Your planner would create a budget for your living expensive and expected growth and payout from your portfolio to cover these expenses. Your annual living expenses, might include your annual trip south, golf membership, car repairs, housing costs, etc., with the goal of saving enough for the retirement home in x years where you will stay until the inevitable happens. Today this paradigm does not work, people are living longer, want to stay active and work in retirement isn’t a bad word anymore. There are numerous benefits to continuing to work outside of the obvious additional income, including socialization and mental stimulation,  but now you can do it on your own schedule.

Lifestyle planning will force you to dig a little deeper and understand what life after your principal career ends  might look like.  The Financial Plan and Lifestyle Plan have to be tied together because how do you know how much money you will need in VL if you don’t know how you are going to spend your time. So work with your financial advisor to build a comprehensive plan. Many financial planners may not be equipped to help you with a lifestyle plan so you will need to do some homework. You need to know yourself, what you like and dislike, preferred work style, and personality traits. Did you like the industry you worked in? If you could start over what career would you chose? What are your hobbies, could you turn that into a job? There are lots of questions to ask yourself so start this process early in your career and be as thorough as possible. You may even learn something about yourself that will help you now. Despite the growing trend in lifestyle planning it is still a fairly new concept, so resources are limited.  We will be publishing a work book in 2018 which will help people plan their Victory Lap, and we will continue to share resources on this site and over twitter to help you research, plan and build your lifestyle plan. The lifestyle plan can be one of the most important and exciting projects you will ever do as it shows you what is in the realm of the possible in your Victory Lap.

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