Bridging the Gap Between Money and Life
By Nico Felipe, CFP®, Financial Coach at Paper & Coin
There is a common misconception that life and money are two separate things: That we have a life on one hand, and we have our finances on the other. The reality is that we only have life, and that we use money to help support it. It seems like a small distinction, but it is a very important one to understand when creating a financial plan.
Why Financial Planning Matters
Many people look at financial planning as the mature and responsible thing to do. Generally, everyone agrees that they should have things such as life insurance, retirement accounts and a budget. However, we often forget why these things are important – and figuring it out starts with asking yourself why they matter to you.
As the reader of this article looking to understand the basics of financial literacy, why is financial planning important to you? It isn’t a trick question with a right answer – the reason financial planning may be important to you could be different than why it is important to me.
Is it to start a business? Is it to follow your passions? Is it to start a non-profit? Is it to travel often? Is it to spend more quality time with your family? Is it to retire early?
And why is this important to know? Because, more often than not, people do not follow through with their financial plan. People delay getting a will. People don’t follow through with their budget. They don’t save diligently.
This isn’t because they lack discipline – it’s because there is a lack of clarity on “why” they’re doing it in the first place! Meanwhile, this clarity can act as the bridge between life and money they need to make it happen.
Here is an example from my own practice: I had a client who previously had a hard time saving. He wanted to save, but he would always end up splurging on entertainment and shopping. He was frustrated because he felt like he wasn’t getting anywhere financially, even though he was a decade into the workforce.
After sitting down with him to get a clearer idea of his “why” when it came to saving, he said he felt he should be saving because most of his friends were getting married and having children. I asked him: “Let’s assume your friends are in the same financial position as you. What do you want to save towards?”
From there, we uncovered that he wanted to take a year off to travel internationally, as he has always had an inner desire to explore the world. From there, we worked together to find a number he wanted to set aside for that trip, set up an emergency fund, protect his income, set up a savings plan, and considered other financial areas. His financial plan now has him going on the trip of a lifetime in two years.
Not to my surprise, he had no problem following through with his savings plan from then on, and it wasn’t because he had this newfound discipline and willpower to save – what he needed all along was to create a financial plan that genuinely excited him.
Life events and transitions extend beyond marriage, home ownership and retirement. However, many people (even financial planners!) can sometimes assume that this is all there is to life. But what about everything else you want to experience? Like it or not, most of those things will cost money, too.
Knowing that, wouldn’t it be important to consider those things in your financial plan as well?
When we are emotionally connected with our financial plan, we follow through with it. We execute on our plans to make sure we reach our goals. We bridge the gap between money and life and – perhaps most importantly – we find the motivation to get more excited about our lives than ever!
About the Author
Nico Felipe is a Certified Financial Planner® and Financial Coach at Paper & Coin. He’s passionate about getting people excited about life again by aligning how people manage their money with the life they want. Through education and empowerment, he hopes to change the narrative around money.