Pittwater Life September 2017 Issue

Business Life: Finance
Business Life
Getting to the pointy end
of your dream retirement
When I talk to people
about retirement
planning, the
conversation invariably starts
with numbers. Managing
our client’s life savings for
a living, I am aware of the
importance that money plays
in a successful retirement.
But it is incomplete to look
at figures without taking into
consideration what purpose
money will serve: your
quality of life and sense
of emotional wellbeing.
Numbers alone don’t
provide emotional wellbeing
and quality of life. There is
a need for an approach that
fuses both realms into one
conversation – which we call
Financial Life Plan ning.
All of us face the challenge
of developing a retirement
plan that (ideally) will see
us run out of breath before
we run out of money. There
are many ways to approach
this issue but one that seems
to really work is based on
20th century psychologist
Abraham Maslow’s
‘Hierarchy of Needs’. Here
is my version of ‘Maslow’s
Pyramid’ (pictured).
Maslow teaches that we
are motivated by unmet
needs, and that lower needs
must be satisfied before
the higher needs can be
addressed. We must meet
Money
Pyramid
our most basic needs (like
physical survival) before we
can address our higher needs
(like belonging).
Let’s look at the different
levels of the Pyramid.
Existence Money
Existence Money makes ends
meet. How much do you need
to wake up each day and have
food and shelter? Is it $5,000
a month, or $10,000? If you
stripped away the frills and
thrills and just paid for your
existence, what would it cost?
Most people I meet haven’t
taken the time to answer this
question. They might know
how much they spent last
year, but that is a different
number (more like the whole
pyramid).
Security Money
Security Money is money
we must have to meet life’s
unexpected turns. What if
everything doesn’t work
out as you hoped and
imagined it would? This
is money set aside for
things that don’t turn
out as planned.
Things such as the
risk of outliving
your money,
suffering poor
investment
returns in
the early
years of
retirement, or having to help
family members financially.
Freedom Money
Freedom Money is money to
pursue interests, hobbies and
things that bring fulfillment
to our lives. The cost of the
activities (and indulgences)
that bring pleasure and
relaxation into your life is
different for each household.
Some people engage in
low-cost relaxation activities
(like walking on a beach) and
others engage in high-priced
activities (like walking after
a golf ball). Travel, adventure
and personal growth/
education are also some
of the considerations to
include when calculating the
amount needed to fund your
freedom.
Giving
Giving Money is money for
the people and causes that
we care deeply about. Having
with Darren Johns
met our basic needs of
survival, safety and freedom,
our money can be utilised for
a higher purpose. Many of us
would love to do something
for our parents or children
or to support causes close to
our heart. The money needed
here is your giving money.
Dream Money
Dream Money is money for
the things you’ve always
dreamed of being, doing, and
having. What do you want to
be? What do you want to do?
What do you want to have?
Putting a number on Dream
Money is vastly different
for each of us. The time
and money cost to do/be/
have the things that bring
meaning into our lives can
vary greatly. One of our
clients wants to write a book,
which requires a lot of time
but relatively little money.
Another client wants to spend
a year sailing around the
world, which requires a lot of
money and a lot of time.
How to Get Started
Doing this exercise not
only produces clarity, it can
bring you hope. View your
retirement income not as
just a way to pay the bills
but as a means of funding
a life. To get started, visit
alignfinancial.com.au/
resources/ and download
your own worksheet. It’s
quick and easy and will help
to give you a clear picture
of what it costs to live Your
Ideal Life.
Darren Johns is the current AFA Adviser of the Year, a SMSF
Specialist and one of Australia’s only Financial Life Planners.
He is the Principal Adviser at Align Financial, an independently
owned financial planning business. His writing, thinking,
speaking and questioning have made him one of Sydney’s
most trusted resources for people who realise that time is
finite and that more money doesn’t equal more happiness.
Email: adviser@alignfinancial.com.au or call 02 9913 9995.
These comments are of a general nature only and are not
intended as a substitute for professional advice.
52 SEPTEMBER 2017
The Local Voice Since 1991