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To Make a Financial Plan, You Need a Financial Purpose

Alfie Tounjian, CFP, Investment Adviser, Founder & President, Advantage Retirement Group
Five questions to ask yourself to identify what's really important to you, your future and your legacy.

What is meant by "purpose-driven finances"?

SEE ALSO: Successfully Saving for Retirement is Only Half the Journey

It simply means that money and wealth are just numbers on a ledger; they are nothing without a purpose attached to them.

In retirement, that purpose is different for everyone. But remember, this is not about rate of returns. Instead, the question is, "What do you want the wealth you have accumulated to do for you in retirement?" When I ask people that, most often their responses include maintaining a comfortable lifestyle, giving to charity or providing for their family. However, as the retirement years pass, the purpose for the money can change as circumstances change.

Let me give you an example. One couple I worked with thought they had their finances and purpose in place - until their son passed away. When that happened, they decided they wanted to provide for their grandchild's needs through college. We met and adjusted their financial plan to help work toward this new reality - and new purpose.

Even my own financial purpose has changed.

I grew up in a modest home, and there wasn't extra money around. My financial purpose was to live comfortably and provide for my family in a way I had never known. But my purpose changed when someone challenged me to look at the giving side. Instead of the purpose being about us, I began to make it about others. This was a defining moment in my life.

By planning with a purpose, you learn that having all the money in the world will not bring happiness, but having a purpose can bring you the happiness you seek. Think about Ebenezer Scrooge, who hoarded an enormous amount of wealth, but lived a life of misery. It wasn't until he donated to charity and provided for the care of Tiny Tim that he realized true happiness.

In my 30 years of experience as a financial professional, I've found that the better I get to know my clients, the more we are able to build a trusting relationship. After all, they want the assurance that their lifetime of savings will be preserved. In my first meeting with a client, I ask these basic questions in an effort to ferret out their financial purpose:

  • What do you need to live the lifestyle you want? This is essentially asking what it is you really want to accomplish, beyond the basics of food and shelter. Only you can answer that.
  • What are your fears and concerns about the future? Are you worried about your health? Are you concerned about financial security?
  • Which relationships are important to you? Do you want to provide for the important people in your life?
  • What are your interests? Do you like to travel, attend sporting events, go to plays or garden?
  • What is your vision of a happy, healthy retirement? When you have a financial purpose, you can gain motivation, and hopefully, your outlook will be healthier.

What are your answers to these questions? Once you establish a purpose for your money, it will help guide you when it comes to investing, saving, making charitable donations and spending for the rest of your life.

See Also: The Best Investment You Can Make Isn't in Your 401(k)

Rozel Swain contributed to this article.

Alfie Tounjian has the CERTIFIED FINANCIAL PLANNER™ certification and is president of Advantage Retirement Group and Tounjian Advisory Group LLC. Alfie is an Investment Adviser Representative and insurance professional. He has been in the financial services industry for more than 30 years. He is author of the upcoming book "The Retirement Fairway" (available in early summer).

Investment Advisory Services offered through Tounjian Advisory Group, LLC, a Registered Investment Adviser.

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