By Ashley Folkes, CFP
Is happiness one of your retirement goals?
As a financial planner, over the years I've regularly wondered if I should be asking my clients this question. Should I, as I work with my clients to define their goals and create plans to achieve them, ask them if happiness is on their list? Could it even be at the top of their list?
Then, the light bulb came on and I realized it's difficult to be happy if you are financially insecure. Therefore, careful financial planning and happiness are inexorably intertwined. While you can't necessarily plan for happiness, planning for financial independence can play a crucial role in helping you achieve it.
That said, I've come to believe that as you embark on the financial and retirement planning process, you should ask yourself and your advisor what you can do now to help you prepare for long-term financial security and, in turn, improve your odds of achieving happiness.
To help add some clarity to this complex undertaking, it makes sense to explore both variables.
"The term happiness is used in the context of mental or emotional states, including positive or pleasant emotions ranging from contentment to intense joy. It is also used in the context of life satisfaction, subjective well-being, eudaimonia, flourishing and well-being." — Wikipedia.
With that in mind, what are some factors you should focus on to put yourself in a position to achieve your own personal version of happiness — before and during retirement?
- Your physical health. It is hard to happy when you're sick. This is why it's important to maintain an overall healthy lifestyle, get regular checkups, stay active and pursue the healthy activities you love. There's no victory in being the wealthiest person in the graveyard.
- Your mental health. Many of us find we can't turn off the chatter in our minds. This chatter is often about financial anxiety, uncertainty-related fears, and worries about ourselves and those we love. Developing coping skills to manage the worry when it creeps in can allow you to remain positive and focused on the things that make you happy.
- Your purpose. Purpose is something that drives you and motivates you to get up in the morning and make productive contributions to the world. It gives you a reason to push through adversity and past obstacles that will undoubtedly present themselves during your life.
- A sense of community and a social network. Personal connections and relationships are essential to mental and physical health and well-being. As you move through life, work to build relationships in all areas of your life — work, recreation, family, and more — as they will sustain you as you go through life's many challenges and transitions.
- Contentedness. Work hard not to compare yourself to others, as comparisons steal your joy. Remember, everyone has problems, they are just different kinds of problems. Instead, have gratitude and focus on what matters in life.
- Resiliency and a willingness to change. There are many things beyond our control, and accepting this is key to good mental health and well-being. That said, it's wise to have a plan B in place to adapt to things you cannot control and be resilient. Always focus on the solutions, not the problems.
- Growth and improvement. Government studies have shown that life-long learning can help people stay independent as they age. So never stop challenging yourself mentally, whether it's learning an instrument or a language or getting a qualification.
In the simplest terms, financial independence means having sufficient income and assets to be able to stop working and maintain a lifestyle of your choosing.
One of the most important steps you can take to achieve financial independence is to have a detailed financial plan. Your plan should address all aspects of your finances and include appropriate strategies to help you achieve your retirement goals. To create your plan, ideally, with the help of a financial planner, you need to:
- Inventory assets. Make a comprehensive inventory of your assets, including property, liquid savings, retirement savings, investments, and more. To plan for your future — both immediate and long-term — you need to have a solid understanding of your net worth and where you need to focus on accumulating more assets in order to achieve your goals.
- Cover expenses. Match your income sources against your needs, as in which sources will pay for which needs. First are your basic essential needs, things like food, shelter, utilities, healthcare, transportation and clothing. Next, look at all your guaranteed income and try to match those first with your essential needs. These are things like social security, annuities, or pensions. This can also include creating — or adding to — an all-important emergency fund to cover unexpected expenses.
- Plan for discretionary spending. After you have your basic essential needs covered, you should address your discretionary needs. This includes things that bring enjoyment and fulfillment in life. You need to budget the estimated cost of different activities you find relaxing and rewarding, such as travel, clubs, golfing, adventure and sport. This could also include bucket-list money.
- Manage risk and protect your family. Insurance is an integral part of any comprehensive financial plan, not only to protect yourself financially while you're alive but to provide for your loved ones in the event of your death.
- Plan to leave a legacy. There will come a time when your efforts shift from preparing for retirement to focusing on creating a lasting legacy or improving the lives of others. Legacy money is for people you love and for causes you hold dear. You will fund your legacy through investments and strategies designed to help you leave money to your heirs or other beneficiaries.
Only when you have a comprehensive financial plan in place can you be confident you're on track to achieve your goals and financial independence when it comes time to retire.
Money can't buy happiness. But it can help.
The old saying is certainly true. Not only is happiness very subjective — meaning the definition of happiness is different for every person — but it's based on a wide range of factors from health, to relationships, to financial well-being, to finding your purpose. Therefore, you cannot likely put a dollar sign on happiness.
However, money is a tool that can put you in the right frame of mind to experience happiness. Again, as mentioned before, it's hard to be happy if you're worried you won't have enough money to last through retirement. Likewise, it's challenging to be joyful or focus on your purpose if you're not sure you can pay your bills.
Conversely, being financially secure can give you peace of mind. It can allow you to relax and enjoy yourself during retirement. Because you'll know you can pay your bills, afford quality healthcare, pursue activities you enjoy, support causes you care about, and leave a legacy to your loved ones.
By taking care of your body, mind, spirit, family, and wallet, you can put yourself on the path to enjoying a rewarding, relaxing, fulfilling, and even happy retirement.
About the author: Ashley Folkes, CFP®, CPWA®, CRPC®, RICP®
Ashley Folkes, CFP®, CPWA®, CRPC®, RICP® is a Senior Financial Advisor and Director of Growth Strategies for BridgeWorth Wealth Management located in Birmingham, Alabama. He has a passion for working with people dealing with life transitions and professionals and business owners with complex financial needs and goals. You can discover Folkes’ contributions to the financial industry in numerous media outlets such as CNBC, Barron’s, Forbes, Wall Street Journal, Morningstar, MarketWatch, and Reuters.