Financial Decisions: Not Always By The Numbers
- Robert Dunn, CFP®
- 2 days ago
- 4 min read
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. But it’s important 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?
Wealth means different things to different people. Some people believe wealth means having a nest egg that’s large enough to relieve them of any financial concerns. For others, wealth is about having enough resources so they can meet their basic lifestyle needs without having to work again. For others, wealth is about having enough money to live comfortably, with enough left over to make sure their heirs are well taken care of, and their favorite charities are well supported. Each of these wealth goals are easy to solve by using math. But as advisors, we must sometimes put our calculators away and listen deeper to each client’s needs and desires.
Many clients want to provide their children with more opportunities in life than they had themselves. Some want to improve their health. Some are worried about being a burden to their children if nursing care is needed. The variables are limitless. So, what is the right answer? As with so many things in life, it depends. Here are four scenarios we have helped clients work through:
1. Breast Cancer Survivor
A few years ago, a couple we worked with learned the wife had breast cancer. They had saved well for retirement but were not ultrawealthy. After the cancer diagnosis and subsequent treatment, they realized their time together could be limited. So, they started living for today and worried less about the future. This was a huge emotional decision that wasn't tied to the stock market, interest rates or tax policy. It was tied to the love they had for each other. In other words, it wasn’t something our computers and sophisticated software could solve. It required lots of deep conversations about what's 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 lots of very well-educated clients, and many are willing to make great financial sacrifices to send their kids and grandkids to elite universities – often their alma mater. That may sound admirable, but with the exorbitant cost of private colleges today and minimal financial aid for reasonably affluent families who have lots of assets, home equity and children who aren’t exceptionally large elite athletes, 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 the financial obligations and long-term outcomes, by getting to know our clients and their family dynamics so well – and by sharing with them 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 and help them make the decisions that will give them the greatest peace of mind.
3. I Want To Bounce The Last Check Of My Lifetime
What this expression means is that someone’s financial plan was so accurate that they and their spouse could live comfortably throughout their golden years, but 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 make sure that 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 their retirement to make sure they have sufficient resources for both. It comes down to weighing the pros and cons of purchasing an appropriate insurance policy, or some other planning techniques that would ensure that they have the resources. Some people are wealthy enough to self-insure. But even though they have enough in assets to pay comfortably for their late in life medical expense, they are so anxious about the cost of end-of-life care – having seen it erode the wealth of friends and family members -- that they may choose to pay for a long-term care insurance (LTC) policy anyway.
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 above 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
ROBERT B. DUNN, CFP® is the President and Managing Partner of Novi Wealth
