Understanding Wealth: A Holistic Approach to Financial Planning

Key Takeaways

• No two people have the same definition of wealth. Personal goals often matter more than dollar amounts.

• Emotions matter in planning. Financial decisions often require deeper conversations beyond spreadsheets and calculations.

• If your conversations with your advisor are only about numbers, consider speaking with an advisor who is in tune with the holistic aspects of wealth management.

  
  
  
  

My colleagues and I often write blog posts about not allowing emotions to control our financial decisions. However, it’s essential to clarify what goes into the full financial calculus. As financial advisors, we strive to maximize your wealth based on your personal resources, risk tolerance, needs, and circumstances. But what is wealth?

Defining Wealth

Wealth means different things to different people. For some, it’s about having a nest egg large enough to relieve them of financial concerns. For others, wealth signifies having enough resources to meet their basic lifestyle needs without needing to work again. Additionally, some view wealth as having enough money to live comfortably while ensuring their heirs are well taken care of and their favorite charities are supported. Each of these wealth goals can be solved mathematically. Yet, as advisors, we must sometimes put our calculators away and listen deeply to each client’s needs and desires.

Many clients want to provide their children with more opportunities in life than they had themselves. Some wish to improve their health. Others worry about being a burden to their children if nursing care is needed. The variables are limitless. So, what is the right answer? As with many things in life, it depends. Here are four scenarios we have helped clients navigate:

1. Breast Cancer Survivor

A few years ago, a couple we worked with learned that the wife had breast cancer. They had saved well for retirement but were not ultra-wealthy. After the diagnosis and subsequent treatment, they realized their time together could be limited. They began living for today and worrying less about the future. This was a significant emotional decision that wasn't tied to the stock market, interest rates, or tax policy. It was rooted in the love they had for each other.

In other words, it wasn’t something our computers and sophisticated software could solve. It required many deep conversations about what was most important to the couple. Over time, we became an objective sounding board to help them make those difficult decisions, both financially and personally.

2. Education Is Paramount

We work with many well-educated clients, and many are willing to make significant financial sacrifices to send their kids and grandkids to elite universities—often their alma mater. This may sound admirable, but with the exorbitant cost of private colleges today and minimal financial aid for reasonably affluent families, they could be sacrificing their well-being and enjoyment of life just to pay tuition for children who may or may not be accepted to an elite university.

To alleviate this financial pressure, it might take several conversations to help them understand the pros and cons of scaling down to a smaller, less expensive house while they’re still in their working years. It's not only about understanding the tax consequences and financial obligations but also about getting to know our clients and their family dynamics. By sharing the experiences of other clients who’ve gone through similar situations, we can guide them through these difficult financial decisions. Again, our role is to listen carefully and objectively, helping them make decisions that will give them the greatest peace of mind.

3. I Want To Bounce The Last Check Of My Lifetime

This expression means that someone’s financial plan was so accurate that they and their spouse could live comfortably throughout their golden years, with nothing left over in their accounts when they die. In other words, nothing left to be contested by their children, heirs, charities, or creditors. This requires a different set of planning requirements than for couples who want to ensure their children, grandchildren, and favorite causes are well taken care of when they pass away.

4. I Don’t Want To Be A Burden To My Children If I Need Nursing Care

If that’s a priority, there might be certain sacrifices they have to make during retirement to ensure they have sufficient resources for both. It comes down to weighing the pros and cons of purchasing an appropriate insurance policy or employing other planning techniques that would ensure they have the necessary resources. Some people are wealthy enough to self-insure. However, even those with enough assets to comfortably pay for late-life medical expenses may choose to purchase long-term care insurance (LTC) for peace of mind. They may have seen it erode the wealth of friends and family members and want to avoid that fate.

Again, as advisors, we sometimes have to help clients make decisions that bypass the calculator. If purchasing LTC insurance gives a client peace of mind—knowing they won’t potentially run out of money and be a burden to their children—then it is worth it, even if it means sacrificing some wealth today for the next generation.

Conclusion

Each of these scenarios is tied to emotional financial decisions that can make us feel uncomfortable about our finances and the future. If your conversations with your advisor are only about numbers, consider reaching out to someone who understands the holistic aspects of wealth management. How would it feel to work with an advisor who adds a human element to your planning—not someone simply running charts, but someone who understands your values, fears, dreams, relationships, and personal roadblocks around money?

A holistic advisor helps you define your true meaning of wealth, serving as both a financial and life coach so you can move forward with confidence and peace of mind. Contact me any time to discuss further. We’re happy to help. financial decisions numbers

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ROBERT B. DUNN, CFP® is the President and Managing Partner of Novi Wealth