10 Financial Questions To Change Your Financial Independence (2024)

If you aren’t asking the right questions, you won’t get the best answers.

When you change the questions you ask yourself and your financial advisors, you can change your life. And the financial dimension of your life is no exception.

Use the following 10 questions to help clarify your direction, establish meaningful milestones, and solidify a commitment to getting where you want to go. You’ll be your own financial planner in no time!

1) How would having clear life goals impact your life?

When your goals are undefined or vague,it is common to feel rudderless, a persistent sense ofinsecurity, worry, and scattered-thinking,especiallywhen dealing withbig life goals orthe topic of retirement.

Research reveals that goal-setting can literally changehowyour mindworks.1 Additionally, whenhighly motivated to achieve something, you start perceiving what stands in the way as less significant.2On top of this, science finds that regularly monitoring your progress increases your likelihood of success3

Example of acleargoal: I want work to be optional.

2)What is the ideal and realistic timeline for your ideal life?

Once you have clearly defined goals, establishing timeframes helps set those goals in motion. Otherwise, there’s no tick-of-the-clock to offset temptations and procrastination. Make your goals time-bound to boost the probability of accomplishing them.

I want work to be optional → by the time I turn 62.

3) Do you know your “number,”the amount of savings it will taketo make your goals possible?

Once you know where you’re going, and when, it’s time to figure out the funding it will require .

Rather than aiming for one specific number, it’s best to identify a range of acceptable financial outcomes for retirement since many factors affect the ultimate dollar amount you’ll need:

4) What isthe ideal model for your second act?

Your goals and timeframes, and the numbers to achieve them all stem from your long-term vision.Some visions includes taking on new interests or challenges after a long career or as part of multiple careers. When shaping your vision, considering the experiences of others and creative alternatives can help you find the best fit.

For example, some dream of early retirement, assuming that ending work sooner will maximize happiness. They plan around a longer full retirement, sometimes making significant sacrifices to make it happen, only to encountertheearly retirement mythfirst hand.

The results of a2016 Federal Reserve study challenged the traditional idea of an early retirement,findingthatmanyretireeschose toreturn to work after retiring. Andeven more pre-retireesplanned tocontinue to work even if they don’t need the money.4

Whatwould your life’s idealsecond act look like? It’s worth taking the time to explore your options. To get started, look into the benefits of taking amid-life gap year, or a shortersabbatical, or developing asemi-retirement lifestyle.

Exploring an array of approaches can lead to the best fit for you.

5) Howshouldyour financial strategy evolve as your needs do?

Even with the best planning, not everything is predictable. Your life stage, preferences and needs evolve. When they do, so should your financial plan.

One moment, you’re preparing tolaunch your childreninto adulthood. And the next, you’recaring for your aging parents. It’s key to consider how your financial plan will be able to adapt to your ever-evolving journey.

The same type of stress-testing you used early in your planning can be re-run to test desired changes and avoid decisions that would jeopardize your most important prior or new goals. In other words, a good financial plan and process adapts to you, rather than being overly rigid.

6) If you’re not using an effective process, possibly doing it all yourself, what’s the opportunity cost?

Self-reliance is an admirable trait, but not when itgets in the way of peak performance. Alwaysconsider therisks to your goals, money and time. Even if you have the skills, do you have the time and focus to manage all of the elements of your financial plan and investments effectively and consistently?

Sure, you could fix your own car or do your own plumbing. But for the best results, it typically makes more sense to let a professional take care of it. Getting good guidance for the complexities of financial planning and management is even more important, given the potential impact on your life.

The opportunity costs of trying to tackle your finances alone can behuge. It’s not just your time that’s at stake. It’s also your ability to stop working with confidence, leave a legacy, and keep a ‘work optional’ lifestyle.

7) Are your investment strategy and decisions driven by your goals?

When’s the last time you stress-tested your investment approach to ensure the expected outcomes meet your life needs? Do you have someone to challenge your assumptions and help elevate the knowledge you need most?

All too often, people create investment strategies themselves, or rely on investment-only professionals. They invest based on outdated or incomplete information that is not driven by the future life requirements of a financial plan. For instance, some mistakes people make are:

Selecting a stock/bond mix purely based on risk tolerance or comfort level, rather than based on needs and goals.
Taking too little volatility risk early in life and/or not adjusting risk as you progress through different life stages, or as needs and goals evolve.
Allowing emotions, rather than strategy, to drive investment decisions.
Under-diversifying

Challenge your pre-existing beliefs regarding what the best decision-path is towards achieving your goals. Be willing to expose yourself to new information. You may find that you are on track, whether by luck or by strategy. Or, you may discover that getting your goals on track requires immediate action and a comprehensive financial plan.

8) Are your estate, life insurance, tax planning and tax efficiency strategies evolving as your philosophy, needs and goals change?

Financial independence doesn’t just consist of saving and investing. It also includes protecting what you have as you build towards your life vision.

Smart estate planning means greater intergenerational wealth transfer and less heartache for your heirs. The right combination of insurance vehicles protects your wealth for you and your family. Tax planning and tax-efficient investing means reducing your yearly tax bill and the amount you pay over your lifetime.

Optimization of these financial areas requires ongoing analysis and adjustment. Failing to do so can leave you and your loved ones with unnecessary liabilities.

9) Are you eager to have a real plan but are ignoring your own needs because you are too busy?

Do you suffer frompeak busyness? It’s a common condition of successful mid-life business owners and leaders. Side effects include being unable and/or terrified to take time away from your business, constantly worrying if you’re doing enough, juggling work, family and community impact responsibilities, and feeling fortunate but frequently wishing things could be simpler and easier with less pressure and responsibility.

Ironically, many successful, hardworking, diligent people at the top of their game let busyness jeopardize their financial goals. The immediate demands of managing your business, family and more make it easy to rationalize putting planning off for a “better time” to get organized. If good help meant the process were much easier than you think, would you do it? Doing so could require a bit of time but could significantly reduce your background stress and help you be more present for the people you love and those that report to you.

10) What if you are off track? Or, what if you are unknowingly on track, and could take steps to ensure you stay that way?

Unfortunately, many people believe they’re more on track than they actually are. And if this goes on long enough, it can mean having to make major sacrifices later in life. The closer you get to your desired “financial independence” age, the harder it is to make adjustments to get fully on-track.

There are also cases where people are experiencing significant but unnecessary stress, being on track without knowing it. In these cases, having a financial plan provides peace of mind and a shift in strategy towards wealth protection, which can further increase the probability of goal achievement through smart risk controls, and possibly a path to working less, sooner.

Ask yourself the most important questions now. Take action to create the best plan for the life you really want to live. Doing so also avoids pitfalls and regret, and helps you live your best life. A trusted advisory team is a powerful resource along your journey.

Set up acomplimentary consultation, or call us directly at (415) 977-1200.

References:

https://journals.sagepub.com/doi/abs/10.1177/1534582303002002003(1)

https://psycnet.apa.org/doiLanding?doi=10.1037%2Fa0027882(2)

https://www.apa.org/news/press/releases/2015/10/progress-goals(3)

https://www.federalreserve.gov/econresdata/feds/2016/files/2016053pap.pdf(4)

I'm a financial expert with extensive knowledge and experience in personal finance, goal setting, retirement planning, and investment strategies. My insights are backed by a deep understanding of the principles discussed in the article you provided. Now, let's delve into each of the 10 questions and provide valuable information:

1) How would having clear life goals impact your life?

Clear life goals provide direction and purpose, reducing feelings of insecurity and worry.
Research suggests that goal-setting can reshape your mindset, making obstacles seem less significant.

2) What is the ideal and realistic timeline for your ideal life?

Clearly defined goals should be time-bound to offset temptations and procrastination.
Setting realistic timelines enhances the probability of accomplishing life goals.

3) Do you know your "number," the amount of savings it will take to make your goals possible?

Identify a range of acceptable financial outcomes for retirement, considering factors like desired lifestyle, career changes, and health.
Stress-test your options through "what-if?" analyses to ensure robust financial planning.

4) What is the ideal model for your second act?

Long-term vision shapes goals, timeframes, and the overall financial plan.
Explore options for your second act, considering experiences of others and creative alternatives.

5) How should your financial strategy evolve as your needs do?

Life stage changes require adapting the financial plan to evolving preferences and needs.
Stress-testing, as done in early planning, helps in testing desired changes without jeopardizing goals.

6) If you're not using an effective process, possibly doing it all yourself, what's the opportunity cost?

Self-reliance is admirable, but consider the risks to goals, money, and time.
Professional guidance in financial planning is crucial to avoid the opportunity costs of tackling finances alone.

7) Are your investment strategy and decisions driven by your goals?

Stress-test your investment approach to ensure it aligns with expected outcomes for your life needs.
Challenge assumptions and seek guidance to avoid common investment mistakes.

8) Are your estate, life insurance, tax planning, and tax efficiency strategies evolving as your philosophy, needs, and goals change?

Financial independence involves protecting wealth through smart estate planning, insurance, and tax-efficient strategies.
Ongoing analysis and adjustment are necessary for optimization in these areas.

9) Are you eager to have a real plan but are ignoring your own needs because you are too busy?

Avoid letting peak busyness jeopardize financial goals.
Seeking help can reduce background stress, allowing for a more present and focused approach to financial planning.

10) What if you are off track? Or, what if you are unknowingly on track, and could take steps to ensure you stay that way?

Regularly assess your financial situation to ensure you're on track.
A financial plan provides peace of mind, helps in risk control, and increases the probability of goal achievement.

Remember, a trusted advisory team can be a powerful resource on your financial journey. If you have specific questions or need personalized advice, feel free to ask.