The soft side of financial planning: factoring in peace of mind

It’s just numbers, right?  It should be pretty black and white.  Well, not always….

In my financial planning work with clients, we go through a process of exploring their goals, getting clear on what they really want, and then creating specific action steps to move toward those goals.

When exploring goals, there are three common questions that arise for many people:

  1. Should I rent or buy?
  2. Should I pay off my mortgage or build up my investments?
  3. Should I pay off my student loans or save for a longer term goal, like retirement or a down payment on a house?

The tough love financial guy, Dave Ramsey, usually has a black and white point of view about such questions.  There is one right answer:  “Duh! Of course you would do it this way.”

My personal experience, and my experience working with clients of different ages and in different financial situations, is that the financial planning process is full of grey areas.  There isn’t a black and white, “of COURSE you would…”, answer.

So what do we do?

After guiding clients thought a process of creating their money goals and prioritizing them, we crunch the numbers (or if more appropriate, they do that with their accountant).

For example, one of my clients recently inherited some money from her mother.  She is trying to decide whether to pay off her mortgage or invest the funds in another way toward her retirement.

It’s important for her to be informed and look at what the numbers have to say about each option.   This helps her feel confident in her decision-making process.

Once looking at the financial benefits of paying off her mortgage several years early, vs. keeping her mortgage and investing the money another way, she sees that in her particular situation, there isn’t a significant difference in the bottom-line costs or long-term financial benefits.  So how does she decide?

This is where I work with a client to help them get clear on how they want to FEEL in their money life.    This client is a divorced single woman in her 50’s with a young adult age child.   She has said that it’s important for her to feel a sense of security with her money.   This concern is what keeps her up at night.  And as she weighed the two options, she felt clear that paying off her mortgage will help her feel significantly more financially secure.

Another person might want to feel the satisfaction of being strategic with their money, and prioritize the experience of investing in their future over security; or, questions about how they’ll support themselves in old age may be the thing that keeps them up at night.  This client may choose to build up their retirement vs. paying their home off early.

Bear in mind that there are plenty of situations in which the numbers are more determinative – one choice is significantly better than the other financially.   I’m not talking about these times.  I’m also not talking about letting our feeling selves indulge our desire for instant gratification or steer us into blissful disengagement with our money reality.  I’m talking about a process of connecting with our whole selves and making a conscious decision based on some really great information PLUS our heart and our gut.

Some questions I ask myself – or my clients: Does this choice leave a knot in my belly?  Do my shoulders slump and a little grey money stress cloud follow me around?  (personal note: this is what happens when I have credit card debt.)

Or does this choice get my blood flowing, put a spring in my step, and help me feel lighter, more relaxed and walk taller?

Many financial decisions do not have a single, clear answer.  Often the deciding factor is more about what brings peace of mind.

So when you’ve got some money stresses weighing you down or have an important financial decision to make, yes, look at the real numbers, get clear on the facts, consult with the professionals.   Just don’t forget to include some time to check in with your heart, listen to your gut, and consider what just might help you sleep better at night.

Carrie Van Winkle

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