Most people seek financial advice from a financial adviser, accountant, or friend to become more financially secure, achieve financial freedom, have more time with their family, enjoy “nicer” things or help family out.
But these are comparative terms and everyone’s idea of “nicer”, “security” and “freedom” is different.
It is very difficult to accurately plan for these generic goals and hard to find motivation if there is no personal emotional significance.
Therefore, the first and the most important step in planning for a better future is to have absolute clarity (either as an individual or as a couple) on what “better” means to you and remember why these things are important to you.
If this seems like a daunting process and you don’t know where to start, the following provides you with the framework to work from.
Step 1
What are your fundamental requirements? List all the items you would not give up under any circumstances even if it means enabling you to fund your future aspirations. These fundamental requirements are broken into two categories.
- Basic Requirement/Necessities: things like food, shelter, clothing, power, transport.
- Current Discretionary Spending (which you will not forgo under any circumstances): may include school fees, sporting activities, children’s sporting activities, car, phone, entertainment.
Step 2
Take a leap of faith (and assume that once you go through this exercise you will be able to fund the items you have listed in Step 1 as well as have surplus income) and list all of your unmet aspirations in thorough detail (be as specific as possible). For example:
- Go on more holidays
- Where you are going to holiday?
- With whom?
- Why holiday there?
- How long will you stay?
- How you will feel when you are there?
- Where you are staying?
If an aspiration is to work less, include your reason why. For example work less so I have more time to devote to a charity I am passionate about. List why that particular charity, how much time will be involved, who it will be helping and how will you feel when are more involved.
Step 3
Once you have listed all of your aspirations, highlight the ones that have personal significance or meaning for you.
Step 4
Once you have a list of aspirations with a personal significance, short-list these to a top five list and find pictures that represent these aspirations to you and make a vision board.
Now you have crystal clarity on where you want to be you can start working on how to get there.
So, how should this be implemented in practical terms?
Meet David and Melissa
Let’s examine David and Melissa, who I recently assisted through this process. David and Melissa are in their late 30s, have (what most people would see as) good jobs. David is a lawyer and Melissa a part time English teacher. David and Melissa have three children.
Though they see themselves as financially literate they were starting to question if they were on the right path or if they should be doing more with their money.
When I met with David and Melissa they partially owned their home, which was nearly 20 years old, though a good size, the floor plan was starting to become a challenge for them.
By constantly making additional repayments, their mortgage sat at 400,000.
They enjoyed taking their kids up the coast for their annual camping holiday and also managed to get over to the UK to see Melissa’s parents about every two years.
As well as their home they also owned an apartment in the city, which was being funded by the rent.
So on the face of it they were doing plenty of sound things, but they still had doubts.
The meeting started by asking Melissa what she fundamentally wanted their money to provide.
After a few minutes of silence, Melissa confirmed she was struggling with the question, answering with the common default response of “for my family to be comfortable”.
I rephrased the question for her “No matter what I say today what areas do you still want your money to fund?”
Out poured her answers.
“I want to still go camping with the family as we need that quality time with each other as we are so busy week to week. I want the kids to go to a private school. I want David and I to have our monthly date night. I want to keep healthy and go to the gym.”
Melissa continued for another five minutes.
I then asked her to take a leap of faith and assume for the next 20 minutes that if we worked together we could fund all of these fundamentals.
Then it was time to talk about her unmet aspirations, in particular the ones with personal significance.
They were:
- To start her own home business to be an inspiration to her children.
- To send her daughters to university, which was something she never had the opportunity to do.
- Compete in the Australian Triathlon Champions as a personal challenge.
It was then David’s turn to be put under the spotlight. David agreed with Melissa that continuing to go camping with their family is a must. He also said his passion for motorbikes was a non-negotiable so they will need to replace his motorbike every five years.
David outlined that he wants to have his own practice within 10 years, which specialises in bro-bono work for migrants. As the son of migrant parents, David saw his parents struggle and he believes helping people like his parents was his purpose. He also wanted a gap year to go on a road trip with his family.
We then prioritised both Melissa and David’s fundamentals and aspirations.
- University for their children.
- David has his own business and a gap year within 10 years and the couple have their mortgage paid off before this can happen.
- Melissa starts her own business now, benchmarking it on an ongoing basis and slowly build it to her current part-time salary within 10 years.
From here we developed their vision board, which now sits with pride on their fridge.
