The U.S. economy has now been growing for over ten years, the longest period of economic expansion in our history, but nothing lasts forever. Lately clients have been asking me about how to prepare for the upcoming recession. They’re unsettled by the political environment, threats of climate change and growing tensions with other countries. The future feels uncertain. And many remember the Great Recession of 2008 and 2009 all too well.
I understand these fears. I have them too. But now, as always, it’s important to stay disciplined. That means staying the course, focusing on what you can control and investing for the long haul. The truth is no one knows what the future holds. Recessions, corrections and bubbles have occurred for centuries, and we can expect them to keep happening. But as is often said, emotion rarely has anything to do with logic.
Why is it that we still have these moments where we want to move money to a safe place in case the market crashes? Why do we worry about how much money we have in our emergency fund?
I recently attended a seminar with the father of Financial Life Planning George Kinder, which helped me gain some perspective on this. He mentioned that our fear, anxiety and distress is there to wake us up. The struggle you feel when deciding whether you have enough money, if you should quit your job, or when you attempt to get on the same page financially with your spouse is an alarm. It’s asking you to “find out who you really are in relation to your money.” To alleviate your fear and anxiety, you must resolve your inner conflicts around money and use your resources in a way that builds the life you actually want. Today, I want to discuss how you do that.
The practical and philosophical
If this all sounds very philosophical, it is. One of my majors in college was philosophy, and I often got asked “so what are you going to do with that!?” I didn’t actually know, so I went to law school and became a tax attorney, thinking that it was practical, helpful and people will know what I do. It turns out both of those experiences have led me to my current financial advising practice.
My financial advisory firm focuses on Financial Life Planning. As Kinder describes it, this type of practice connects the dots between our financial realities and the lives we long for. He adds “it’s delivering our clients into the freedom to pursue life’s passions.”
Financial Life Planning is a mix of the art or qualitative side of planning (values, money mindset, fears) and the science or quantitative side (taxes, insurance, investing, etc). As the late Dick Wagner points out in his book Financial Planning 3.0, we are the only industry that is poised to help clients with that part of their life.
Many financial planning practices focus solely on the numbers. But I’ve learned that having all the right calculations and the perfect plan are useless unless you’re ready for change and have the right guidance to get you where you want to be. This intersection is a sweet spot that really helps clients thrive—and not just survive—financially.
That sounds great, but what does this actually look like?
You may think that pursing life’s passions and getting delivered into freedom sounds great, but it may seem a bit too, as one client put it, “touchy feely.” Where does my money come in?
Most financial planning firms focus on how much money you have to manage and try to grow it as much as possible. You’ll hear terms like “efficient tax planning” or “risk assessment.” Financial Life Planners definitely do practical, skill-focused planning like tax projections, open enrollment reviews and efficient business planning.
However, Financial Life Planning starts with where you want to go and why. It puts your interests first and focuses on increasing your sense of financial well-being. So, we help you do things like clarify your values, goals and dreams. We then use that vision to help design a life that is fulfilling and purposeful. In addition, we increase your understanding of specific habits that help support your financial and life goals. Lastly, we deal with emotional conflicts around money. Are you sabotaging your own money goals? Feeling stuck in a job or career that doesn’t fulfill you? Having hard conversations around money? Financial Life Planning can help.
I’ve written before about how this process works and where you can find planners that help in this area of life. I’ve also outlined my actual process here. We provide solutions to questions like:
- Am I using my resources in the best way?
- Will I have enough?
- Can I reach my goals?
When I’ve worked with clients in this way, interesting things have happened. One client approached her boss about quitting their job, only to get more money and better work-life harmony by asking for what she wanted. Other clients have been able to stick to a plan of paying down debt for the first time because they clarified how reducing debt could help them achieve what was most important to them. And I’ve helped new couples get on the same page and start spending money in a way that feels aligned with what they want to accomplish together.
If you’re feeling caught up in the rat race, unable to really communicate struggles around money or just feel inadequate around money decisions. This type of planning is the answer you’ve been seeking.
The main goal is to make sure you’re living the life that you want. You’ll enjoy the ability to live a life that is fully yours and that aligns with your values and goals, without the stress and anxiety the plagues many of us today.
Progress, not perfection
Let’s say you’re onboard! You realize that building a plan for your money is more important than building a pile of money. You’d find nothing more frustrating than climbing a ladder of financial success only to realize that ladder is up against the wrong wall.
That’s great, but don’t assume that it will happen overnight. Change is hard. You’ll have a learning curve as you try to align your finances with your life goals. Some people find that it takes over a year just to get their cash flow situation under control. Others backslide at times. It’s hard to stick to the new habits you’re forming. It’s not uncommon to feel like you’re running in circles rather than making progress. Your upward trajectory likely won’t be linear.
To counteract some of this frustration, I like to focus on progress, not perfection. In other words, focus on just being a little bit better every day – one step at a time – rather than trying to have everything perfect. Spoiler alert: things will never be perfect. The Stoic philosophers claimed that continuing self-learning is be a life-long process. Make sure to find someone who can hold space for your truth and also being willing to help keep you accountable when things get rough.
And try to remember, as Kinder points out, nobody has ever wanted their life to be about owning a diversified portfolio. What you want, however, is a portfolio that makes it possible to have the life you desire. Use your fear and anxiety as a catalyst to create a fulfilling and meaningful life. The biggest risk to your financial future isn’t the upcoming recession or correction or inefficient tax planning. It’s letting your life go by without truly living into your purpose and doing what you can slowly and steadily live the life that you want.