Author Scott Boyles
When you meet with a new financial advisor, you can almost guarantee that one of the initial questions will be: ‘what are your goals?’ I will admit I’m guilty of this too, and I can admit that goals are hard questions. We are bombarded with typical ideas of what success looks like for example “buying a house” or “retiring early.” These are the pretty standard answers. But are those your goals?
Things like home ownership and retirement are all great ideas in the right context, but they are just a part of the equation. The purpose behind the goal is more important than the goal itself. A lot of times we are taught to say these things because society tells us these are indicators of wealth. The truth is, fulfilling the purpose behind a goal is the true feeling of wealth.
The most common answer I get to the goal question is home ownership. If you are currently renting, ask yourself why you want to buy something. Other than it’s what you are supposed to do. I’m sure you’ve heard the statement, “renting is throwing away money.” The truth is owning a home is expensive. While it does have benefits, it can also be a liability in your future decision making. Typically, the cost to sell is around 8-10 percent of the selling price. We’ve experienced a special time in real estate where the growth rate more than covers the cost of selling in the short term, but typical growth rates for real estate are about 3% a year. That doesn’t take into account the operating expenses of the home such as maintenance, repair, and the systems like HVAC or plumbing replacement. I feel like this is the most frustrating part of spending money on a house, spending things on things you can’t see. Traditionally, factoring in these costs, a residence is a lousy short-term mathematical investment. Typically, it takes seven to eight years of home ownership before you’re effectively in the black.
One purposeful goal of buying a home; however, is providing a long-term stable place for your family. Enjoying your neighbors and living in a quality school district are great intangible assets in addition to owning the home. The ability to raise kids in a house with a yard or having the stability of family nearby is going to have a bigger impact on your overall happiness and wellbeing even more than the physical house. I emphasize this in the long-term. Buying a home is one of the largest financial decisions we make.
Retiring early is an aspiration the Baby Boomer generation developed. Boomers as a majority commute and work in an office typically eight hours a day, five days a week. Early retirement in this scenario means not having to do these things anymore. There are a couple of problems with the traditional idea of early retirement, though. A lot of early retirees are already getting tired of only playing golf and not feeling like they have a purpose anymore. We are seeing more depression, increased spending from boredom, and a loss of that necessary feeling of belonging to a sense of community and place. Consistent social interactions are important in supporting our social needs. Ask yourself what retirement is to you. I see retirement as the financial flexibility in choosing what you want to do, how you want to do it and where. That doesn’t necessarily correlate with the original idea of retirement.
Affording the ability to choose to work is much more fulfilling as a goal. It creates a completely different mindset of choosing to work versus having to work. Technology now allows working from anywhere at any time a true possibility for most people and working longer results in a more successful personalized retirement plan. Aligning your purpose with your finances. Making these choices in a role you enjoy leads to more happiness.
As you set your goals, think of your why. Understanding why you want these goals helps you find the purpose behind them. And fulfilling that purpose lends way to your happiness. Being stuck in a house you can’t afford, or in a job that you can’t wait to leave isn’t going to bring you much happiness. Being honest with your goals and the why behind them will put you in a much better position to achieve them resulting in more enjoyment along the way.