by Mitch Anthony

Many people have told me about going through life with a haunting, eerie feeling about their financial lives. They are afraid of those aching questions that never quite make it to the surface of a conversation: Am I walking a financial tightrope with my debt and spending? If my income took a hit, would my lifestyle fall like a house of cards? Is it okay to spend some money to have fun once in a while? Am I really living within my means? My guess is that you’ve heard many of these same questions from your own clients.

Like a lost hiker in the mountains who discovers a global positioning instrument, just discovering where you are brings a degree of comfort. The exercises in this article will act like a financial global positioning instrument for your clients—and help you advise them. Clients will gain clarity on where they stand—no more wandering and wondering. Even if this exercise reveals that they still have a ways to go, your clients will at least have a roadmap to help them reach their destination. Let’s get started!

Level One: Survival

Making ends meet is not the same as knowing how much you need to survive—and your clients need to understand the difference. Making ends meet can include many items outside the purview of survival, such as dining out, health club memberships, extra vehicles, and even expensive toys. Encourage your clients to discuss their survival situation with other family members, and complete the Survival Money Worksheet.

Survival Money Worksheet

Level Two: Safety

Once clients know they can meet their survival needs, it is time for them to think about protecting that survival. Inflation is a thief over time. Many of the safety issues can be addressed through insurance products such as long-term care, health insurance, health insurance supplements, disability coverage, life insurance, and homeowner’s coverage. Exactly how much risk a client can tolerate is up to them. Each of us has a distinct and individual tolerance for risk in our lives. For the sake of awareness, it’s important for clients to have a conversation about the exposures and vulnerabilities in their lives and in the lives of family members. At the end of that conversation, with your help, they’ll be in a better position to decide what protection they need—and can afford.

The fact that people continue to build homes on fault lines proves that everyone is unique in his or her response to risk. Some people are comfortable with the risk of living to 100 and trusting that income will be there, and others are not. Some people are comfortable dealing with aging and long-term-care issues when they arise, while others would rather prepare ahead and remove future exposure. As with all risks in life, we must first acknowledge that the risk is there, and then decide how to respond to it. Risk protection is not something we get excited about having, but there is some peace of mind in knowing that, if life brings adversity, we will be safe. Have your clients complete the Safety Survey Worksheet so they can see where their vulnerabilities exist, and help them determine how to address those vulnerabilities.

Safety Survey

Level Three: Freedom

Too many people are in denial regarding their leisure, travel, and entertainment accounts—and suffer as a result. If your clients can’t afford the fun they’re having, then finding less expensive options is their only option. If they can afford the fun they’re having, then they should embrace it. It’s important to cash some life dividend checks along the way. It is also important to have clients sit down and figure out how much these freedoms are costing them, and how they will continue to pay for them.

For some, freedom money is about more than leisure. It is about the freedom to pursue personal growth and expand their capabilities. These pursuits also come with a price tag, whether it is pursuing a degree, taking language lessons, or embarking on a self-improvement course, but they can all bring great joy into a client’s life. Have clients tally up their freedom costs on the Freedom Income Worksheet, and calculate the monthly income needed in the total box at the bottom.

Freedom Income Worksheet

Level Four: Gifts

Once we pass survival, safety, and freedom in our financial hierarchy of needs, we come to the place of giving to others. This is not to say that we can’t do any giving along the way while we pay our bills related to survival safety and freedom. Many people systematically give, or periodically support, causes that they care about. Have clients use the Gifting Income Worksheet to help them figure out this part of their life income stream. If they find they really can’t afford to provide monetary gifts, reassure them that there are plenty of other ways to contribute.

Gifting Income Worksheet

Level Five: Dream Money

The last level to evaluate is that of our dreams, or to borrow from Maslow, self-actualization. Self-actualization takes a different form for every individual: starting and running a business, taking a year to travel the world, writing a book, volunteering—the list is as endless as the number of people who dream. The Dream Worksheet will help your clients figure out what they need to pursue their dreams.

Dream Worksheet

Have clients tally up their totals from each worksheet and transfer them to the Income/Outcome Worksheet. At some point, we all need to engage in the process of figuring out how to make our income provide a return on living and last a lifetime. Peace of mind and contentment enter the picture when we designate exactly what assets will pay for which liabilities—and balance our lives.

Income/Outcome Worksheet

Once your clients have completed this exercise, they’ll be in a much better position to know where they stand, what they want, and how to reach their goals. Whether you ask them to work on this exercise in one sitting, or have them complete the worksheets over time, both you and your clients will be in a better position to achieve a Return on Life™.

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Adapted from The New Retirementality: Planning Your Life and Living Your Dreams…At Any Age You Want, Fourth Edition by Mitch Anthony. ©2014 by Mitch Anthony. Published by John Wiley & Sons, Inc.

© 2015 Mitch Anthony

Mitch Anthony is the founder and president of Advisor Insights Inc.and the Financial Life Planning Institute, the leading provider of financial life planning tools and programs.

For almost two decades, Mitch and his team have provided training and development for both individual advisors and major organizations throughout the world. Mitch personally consults with many of the largest and most-recognizable names in the financial services industry on both financial life planning and relationship development.

Mitch has been named one of the financial services industry’s top “Movers & Shakers” for his pioneering work, and is interviewed by the media on a regular basis. The Institute is partnering with both Texas Tech University and the University of Georgia to develop financial life planning programs for their undergraduate programs. Mitch is a popular keynote speaker, columnist for Financial Advisor magazine and Journal of Financial Planning, and host of the daily radio feature, The Daily Dose, heard on over 100 radio stations nationwide.

Mitch is also the author of many groundbreaking books for advisors and consumers, including perennial bestseller StorySelling for Financial Advisors, cited by “Financial Advisor” magazine as the number one “must-read” book for financial professionals. Mitch’s other books include The New Retirementality (now in its 4th edition), From the Boiler Room to the Living RoomYour Clients for LifeYour Client’s StoryThe Cash in the Hat, and The Bean is Not Green. For information on these books and more resources, click here. Contact Mitch at [email protected].