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Life happens and when it does, there usually are money consequences. The first part of each new year often brings with it unexpected expenses, taxes, and changes in priorities for many clients. This year has been no exception. The key is to make sure that you don’t let short-term issues alter the long-term trajectory of your financial plan.
When you think about how you make money decisions, you’re inevitably considering how the choices will impact your life. The intersection of money and life is essentially the center of gravity for financial planning. This is where your goals and money are in balance.
The crossroads where your goals and resources meet is the beginning point for your financial life journey.
You probably think of life and money as separate categories, but they are closely connected. Almost everything in life relates back to money. You can’t disentangle one from the other. Where you live, where your kids attend school, the car you drive, and the clothes you wear all are linked to money.
As much as you might want life to be predictable and steady, it’s sometimes unpredictable and shaky. Both positive and negative life events can cause you to detour from the path you planned. Life is dynamic and your money decisions should adapt to your life changes.
We sometimes see a disconnect with clients when it comes to expressing life goals in money terms. We recently worked with a client who sold a business and as a result, had a laundry list of life changes he wanted to pursue. His aspirations far exceeded his financial resources, even though these resources were substantial.
It’s quite common for clients to initially resist discussing life goals within the financial planning setting. You have to cross that barrier in order to realize life is connected to money in almost everything you do.
When thinking about financial goals, consider attaching an estimated dollar cost next to everything that you want to accomplish. If you’re like most clients we’ve worked with, you will quickly realize that you have to prioritize. You likely don’t have enough money to do everything that you can imagine.
Money is like food. You need it to sustain life, but you should be smart in how you approach both. Poor food choices can have a detrimental impact on your health, the same holds true for poor financial choices. Your financial health requires trade-offs and setting priorities. Your money priorities should be reflected in your financial decisions.
The key to financial peace of mind starts with balancing the personal and financial parts of your life. Start there.