Today we have more than enough electronic devices and toys, luxury goods, and new consumer products to make life more "comfortable." Many individuals think that earning money and amassing consumer "stuff" are their goals in life. I believe money is only a tool that will help you get to where you want to go in life.
Individuals who think having money and more consumer "stuff" is a goal in life may later find themselves on the treadmill of life or in the constant daily rat race. Individuals who think earning money and amassing consumer "stuff" are goals may find that once they achieve their materialistic goals, they only experience a temporary feeling of success and later become discontented, wanting more money and "stuff."
I believe an individual must consider his or her wealth in three related areas: individual wealth, monetary wealth, and satisfaction. My experience has shown to me that these three areas overlap and work together in helping an individual achieve financial excellence in life.
Many believe that accountants are the most boring people on earth. However, I believe that my experiences as a certified public accountant and certified financial planner™ have given me the opportunity to see all of the emotion and excitement between individuals and their money.
The individual area comprises an individual's values, ethics, morals, and beliefs. The satisfaction area comprises an individual's personal health and philanthropic/spiritual relationship to his or her community and environment. The monetary area comprises an individual's accumulated financial assets or money.
An individual who plans his or her wealth while considering these three areas will be able to achieve a goal that is higher than financial success. This individual will be able to achieve a life of significance and a life legacy that will go on for generations after his or her last will and testament. By planning and defining their individual and satisfaction area components, people can better plan how to approach their monetary/financial wealth. Life planning that considers these three areas will allow for an efficient roadmap or a way to prepare a financial plan of significance.
The concept of individual planning can assist you with identifying what is important in life. A proper choice of career will create better chances for day-to-day energy and satisfaction in life. Identifying your values will help you decide how you desire to leave money to heirs, where you will retire, what will make a fulfilled life, how your time will be spent, etc. Investing in yourself is important; lifelong learning can help you stay alert and active. Investing in a child's or grandchild's education can also be an important value to pass on.
The concept of satisfaction planning will assist you with identifying what social, community, spiritual, and/or charitable causes are most important to you. Many studies have shown that happiness relates to serving others. Giving with a true purpose or belief is investing in an area that may provide you with priceless returns. Personal health must be maintained because without good health, it is difficult to experience a successful life.
The concept of monetary planning is important. Money should be used as a tool to allow people to reach their individual and satisfaction goals in life. Monetary success will allow a person to give to his or her family or charity, retire one day if he or she desires to do so, better maintain excellent health, and have time to spend on a social cause.
Monetary assets will help keep you alive, but they will not ensure an excellent life. A similar example might be the air we constantly breathe, which keeps us alive but is not the only component that keeps us alive; we all need other components, such as blood, to sustain our lives.
Defining your goals, values, and beliefs will assist you with developing a roadmap that can be used to get to a life of significance and through life's difficult transitions. Activities that may assist you with developing a master plan for your life include writing a family or personal mission statement, going on a family retreat or having family meetings, creating a family foundation, or engaging a professional financial planner who is able to assist with the synchronization of these three areas. An exercise to help identify what is most important is to think, "What would I do if I only had a week to live? How would my life legacy carry on into the future?"
Some believe that happiness depends on three integrated circles: money, health, and happiness. Without all three circles, it is difficult to be truly happy. The three areas I discussed above are very similar in nature. To have a life of significance, one must have success in these three areas, and one's life plan must be synchronized to achieve success.
If individuals use this life-planning concept early in life, it may also help them plan their careers, which will result in a more efficient overall life plan. One's career can be a source of intellectual, emotional, and financial happiness. An appropriate career will give a person the ability to achieve the income he or she requires to pursue his or her dreams and goals and allow for a job that is enjoyable rather than hated.
Career asset management is a very important aspect of one's life plan, and a career is one of the most valuable assets for an individual. Using this life-planning concept, one can better define what is necessary to obtain his or her life legacy, and by knowing what the end result is from the start, he or she will be able to develop an effective roadmap to get to his or her dreams and goals.
One reason many baby boomers are so scared about retirement today is that they do not know how much they will need to have in order to retire successfully and comfortably. By planning your individual factors, satisfaction factors, and monetary factors at the same time, you can better determine what you need to have accumulated in order to retire successfully and not run out of financial assets prior to death.
Each individual has a personal definition of wealth and what is required to achieve a successful lifestyle. One individual might have a very different dream of personal freedom or may value relationships and time more than material assets.
Desiring to obtain vast amounts of monetary assets is perfectly proper if they are required to complete your life goals. Monetary assets are required in order to give to a favorite charity, church, or family or friends; live comfortably; and obtain the best medical services. However, monetary assets alone without a purpose or use will not ensure a state of happiness in life. If you are not truly honest with yourself, an appropriate financial budget/target that can be used to achieve your personal dreams and goals cannot be appropriately quantified.
Successful families and individuals who have achieved financial excellence or lives of significance have integrated plans that have promoted the value of education, social values, ethics, morals, career development, and business, which in turn have allowed for successful retirement years and lasting family legacies. Many believe that it is important for families to instill in children good habits with respect to money and investing early on.
Once an individual understands that money is only a tool and not the ultimate goal and understands the relationships between individual, monetary, and satisfaction factors, he or she can achieve financial excellence or a life of significance.
This life-planning concept that integrates individual, monetary, and satisfaction factors will develop the manner in which financial assets are used and dispersed over one's life, as well as how financial assets are accumulated. The responsibility and significance associated with determining how financial assets will be distributed can cause more difficulties and issues than people usually encounter during the accumulation of financial assets in life. This life-planning concept turns investing from a "hands-on, how-to" issue into a conceptual life journey and helps to align money with the individual's personal well-being.
Many individuals are very good at earning large amounts of money and are experts at spending it but lack plans for their total wealth. The result is that they do not achieve financial excellence or lives of significance.
A life plan that is periodically updated will help reduce anxiety and fear and increase your own financial literacy. Putting this life-planning concept at the top of your financial plan will help ensure that all strategies, investments, and planning for fiscal and personal health focus on your dreams, goals, beliefs, and values.
The choice is yours-yes, you can achieve financial excellence!
Certified Financial Planner Board of Standards, Inc., owns the certification marks CFP®, Certified Financial Planner™, and the federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
IRS Circular 230 Disclosure, pursuant to Internal Revenue Service Circular 230: Any tax advice contained in this communication does not constitute a formal opinion satisfying such requirements under IRS Circular 230. The tax advice included in this written or electronic communication was not intended or written to be used, and it cannot be used by the user/recipient of this document for the purpose of avoiding any penalties that may be imposed by any governmental taxing authority or agency.
About the Author
Dwight Nakata, CPA, CFP®, is a member of the Orange County chapter of the Financial Planning Association and Orange County/Long Beach chapter of the California Society of Certified Public Accountants. He has an independent financial planning firm and is also a partner in a CPA firm in Southern California. Contact him at 714-329-5022, dwight.nakata@genworthrr.com, or cpa.nakata@earthlink.net.
