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I talk a lot on this site (and, on http://7m7y.com) about money being there to serve your Life …
… yet, we slave our lives away to the pursuit of money. Go figure!
So, when working out your Number – that ‘magic number’ that tells you if/when/how you will retire – it is my contention that you first need to start by understanding your Life’s Purpose.
It’s nice to see that somebody on the finance community agrees with me: George Kinder, author of The Seven Stages of Money Maturity!
In fact, George is a financial planner who is one of the early pioneers / practitioners of a form of financial planning called ‘Life Planning’ … where your financial plan is designed to support the life you want, not necessarily the life that you have.
I have provided some exercises to help you understand your Life’s Purpose, hence your Number; similarly, George Kinder poses three questions that he considers important in achieving a similar result (you may have seen these on Oprah):
1. “Assume you’ve got all the money you need – enough for the rest of your life. Maybe you’re not as rich as Warren Buffet, but you never have to worry about money for any reason. The question is, what would you do with it? How would you live? Feel free to let your imagination roam. What would you do with it all? Think for a moment, then write down the answer … ”
2. “You go to the doctor. The doctor discovers you have a rare illness. He says you’re going to feel perfectly fine for the rest of your life. But, he says the illness will prove fatal. The sorry outcome will occur sometime within five and ten years. It will be sudden. The question is, now that you know that your life will be over in five years, how would you live it? What would you do?”
3. “This question will sound a bit like the previous question, but it’s different: It starts the same way. You go to the doctor. You’re feeling perfectly healthy. And again the doctor says you have a serious illness. But then the doctor says, ‘You only have 24 hours to live.’ So, what did you miss? Who did you not get to be? What did you not get to do?”
Of all these questions, obviously the last is the key … and it is the purpose of the Rear Deck Speech – designed to make you think past ‘things’ and to the more deep/meaningful aspects of your ideal life.
These questions, however, will help you if you’ve been struggling with the Finding Your Life’s Purpose exercises that I provided …
This is a great thing to remember.
If I had my number I would do what you are doing. I would help other people on their path. I would also invest all extra funds simply to build a fund that will help people for years after I am gone. I like education so I would put much of it aside for smart young people who can not afford to go to school. I would ask them that 10 years later they help give “something back” to the fund. I think such a fund would keep growing because most people would probably put more back than they took out. Plus the fund would hold the assets in real estate, after 30 years the rent would be pure cash flow.
If I knew I would going to die soon I would spend a lot of time with my son, and my wife to make sure that they have a good life after I am gone, that they would go in the right direction.
Great question, it helps us to remember this stuff.
For the last few years I have been in a bit of a funk, everything I tried has failed, and now the economy is sick so it is even harder, yet I keep going on. I am working on new ideas now even.
Jason Dragon
http://blog.capitalactive.com/
AJC – I’m impressed that you read Kinder’s book. I picked it up but became disinterested as we delved into the “pain” aspect of money.
Maybe I’ll finish it someday as it appears I put it down before the really good stuff came along.
Thanks
-Jeff
I’m managing my money, are you managing yours?
@ Jason – I would be interested in seeing your Lee’s List (if you are working on one): http://7m7y.com/2008/10/03/crevices-and-foot-holds/ … does your Number account for this fund? Thanks for sharing …
@ Jeff – I cheated 🙂 I had read Kinder’s questions elsewhere then came across them again in Eisenberg’s book, The Number (which, I think, actually has very little to do with Your Number!)
@ Jason– I love your idea for a fund for education for the less fortunate. Although, I think, that we need to go back to actually teaching the subjects that matter earlier in life. The education system has become an institution that teaches how to pass a standardized exam rather than learn the subject. In many cases I feel we don’t need school. For example, I am trying to instill some of the lessons Adrian talks about in his blogs to my 13 yr. brother and I find myself “biting my tongue” he asks, “When am I going to learn that in school?” The truth is he won’t see it in school or at a university level most of the time. But no matter what our Life’s Purpose is we all need to know these lessons, even if your Life’s Purpose is to be a policeman, fireman, doctor, or anything else one aspires for.
I read Esienberg’s book as well. His number is alluded to quite often, but not really detailed in any manner that helps the reader calculate anything.
Eisenberg’s number was a good read and opened my mind to the idea of having a retirement worth living, but that’s about it.
-Jeff
Learn to manage money at Minding My Own Business
@ Adan – My son’s interest in money and business is mostly ‘self taught’, although I do answer any questions that he asks. However, you are right about the schools: they teach cooking but not finance.
Luckily, with eBay and other online marketplace, kids can pretty much teach themselves, if they have the desire …
@ Jeff – That’s probably enough, although a better title would have been “A Retirement Worth Living” 🙂
The question about education is interesting. I’ve also been doing a lot of thinking about it.
I think that much of what the US still has to offer the world IS a good education, but when you look at what is taught, we are not taught modern history until we become undergraduates in college, and even that is superficial. Much of what we learn in the public schools takes us (or took those of us growing up in the 60s and 70s) up to WW2 only. And the economics of most of the wars was never discussed. It was always the idealism that was discussed.
When I first went to college – in 1979 – the question making the rounds was the changing face of college educations from teaching people how to think to teaching people how to do something (accounting, for instance). Yet, much in my own field is stuff that cannot be learned in schools until you hit a master’s degree, and again there is no diving down deep except in one’s own job (unless you’re doing a PhD thesis on something). I’m beginning to think that a college degree should be something that is worked for only after exposure to working.
I also disagree that people will put back more than they take out. I too, used to be idealistic, Jason, but I have not seen that people tend to be that way at all. More that they are made of good intentions perhaps. If it were a requirement of the program that they do something, then they would probably agree and uphold that, but I doubt a voluntary basis would have the same result. Just my opinion. Perhaps there would be another way to get this back.
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If I never had to worry about money again, I would invest in more cash producing assets. Basically, I would be creating money for generational wealth. If I were to pass away within 5 years, I would buy everything that my family needs. Then I would make a will. I would give away my wisdom, as to how I made all of money, to willing ears that want to heir. In the in end, I would thank God for the opportunities for doing everything I just listed.