For eighteen years at a large firm, my goals were as vague as most of my clients’ goals: make better money, incrementally, over time. I was good at selling. But I didn’t go home feeling I had made a difference in anybody’s life.
That changed once I started sitting on the same side of the table as my clients, helping them retire on time and not run out of money. Those things don’t earn a wealth manager more money. They help clients. Eventually I left and opened my own office.
Now I see my old self in most of the people who walk through my door.
They may have a general, vague hope to increase their net worth. That’s a fine place to start, but without a clear direction, they’ll end up living an imbalanced lifestyle chasing money first and last.
Trevor B. Hanson, UNSPLODE
Creating a WealthSpan that lets you live your life today and tomorrow starts with taking stock of your wealth goals and infusing them with your why. At the company I founded, I call this the Purposeful Planning Process.
Why a plan without a why tends to explode
In my introduction, I describe what passes for planning at most big firms. You answer a questionnaire, get sorted into conservative, moderate, balanced, growth, or aggressive, and leave with a cookie-cutter portfolio. Choosing a percentage of risk isn’t purposeful planning. It’s the illusion of planning.
I would go so far as to say that if you have a traditional plan, you’ve done no planning. There is nothing anchoring the plan to purpose.
Trevor B. Hanson, UNSPLODE
There is no carrot and stick, nothing that makes you want to stay with the plan when the market drops or a shiny opportunity shows up. That leads to credit card fat, overspending, gambling-style investment moves, and the cognitive biases I cover in the chapter, like loss aversion and herd instinct.
In my experience, the more volatile a client’s mindset, the more they want to live outside their means, pull out of bad markets, or chase risky investments. Those are the moves that explode a portfolio. A why is the anchor that holds you in place when everything around you is moving.
The four steps of the Purposeful Planning Process
Planning that unsplodes the ticking time bomb of a traditional portfolio is reverse engineering. You start with your purpose and work backwards from there. Here is how I do it with my clients.
Step 1: Define Your Why
This is where you set the vision, name the value, and use that to anchor the plan. Your goals should center on what matters most: your life, your values, and your legacy. These are some of the questions I ask my clients. Ask them of yourself:
- What does a fulfilled life look like to you?
- What experiences would you like more of?
- What legacy do you want to leave?
- What values would you like your money to represent?
- What type of health are you hoping to achieve?
Most of the time, my clients are a bit befuddled. They admit they haven’t really thought much about their why before. That still blows my mind, and changing it is part of my own purpose.
Your purpose becomes your North Star, a pathway or lens through which every financial decision is made.
Trevor B. Hanson, UNSPLODE
Step 2: Take Inventory
With your purpose determined, you need a full picture of where you are today, so nothing gets missed. This is the nitty gritty part.
Start with net worth: list every asset, then every liability, and subtract. Look at taxes, including future exposures like capital gains and IRA distributions, with a tax professional (I am not one). Check your estate plan: a will, a trust, gifting strategies. Then cash flow, which is how you use money as a tool to live your life: what comes in, including Social Security and pensions, what the essentials cost, what is discretionary, and what you want in order to pursue your purpose. Finally, inventory your insurance, asset protection, and any business interests.
Your discretionary list is really a list of things you could cut to aim your plan back toward your purpose. Just remember that experiences are non-negotiable. Camping might replace the Maldives, but making memories stays in the plan.
Step 3: Plan With Purpose
Now you connect the two. I custom-build a plan that supports the life a client wants to lead, with enough flexibility to evolve. It covers retirement income modeling, an investment strategy built around goals, tax efficiency, estate design, and charitable giving. It also covers what a traditional plan leaves out: vacations, purposeful discretionary spending, and investment in your health and yourself.
And start now, wherever you are in life. The Rule of 72 says that seventy-two divided by your annual rate of return is roughly the years it takes to double your money. At 8 percent, that’s about nine. In the book’s hypothetical example, $100,000 growing at 8 percent from age twenty-five doubles about five times by seventy, landing at $3.2 million. Miss the fifth double by starting late, and you miss $1.6 million.
Step 4: Adjust With Intention
Your purpose is more than a starting point. A strong WealthSpan reconnects with it and adapts the plan as needed, for three main reasons: markets change, laws change, and your spending changes, sometimes because of a windfall and sometimes because of a downturn.
Why an ongoing relationship? Well, life doesn’t sit still. And neither should your plan.
Trevor B. Hanson, UNSPLODE
A wealth manager worth their salt gives you regular reviews, timely course corrections, coordination with your CPA and attorney, and clear next steps. You shouldn’t have to wonder whether you’re on track.
Design your ideal day, not a vague future
Designing a plan around your unique life means more than financial independence. It’s about designing your ideal day. What do you want your day to look like right now? Five years from now? In retirement? Fill your imaginary calendar with your life, and you’ll see there is a financial plan that can get you there.
Once that carrot is dangled in front of you, two daily habits follow. You start living for today instead of wishing your week away, and you start saving and spending according to the plan that allocates you your dream life.
My cousin and co-author, Dr. Caleb Pinegar, interjects here with his own answer: golf once a week with his kids when he’s retired. As the resident doctor, he knows he won’t have the body for it unless he takes active steps today. That is the HealthSpan half of every ideal day, and HealthSpan and WealthSpan explains how the two halves fit together.
The side effects of having a plan
For anyone looking to reduce stress, a plan is the antidote. It gives you confidence, focus, and clarity. And when you have the right plan, you have the right mindset: you don’t get rattled into selling everything when the market dips, or into a fast-money bet that sacrifices your long-term purpose.
How to start
You don’t need an advisor to take Step 1. You need an hour, something to write with, and honest answers.
- Download the free Define Your Why worksheet and answer the questions above.
- Sketch your ideal day right now, five years from now, and in retirement.
- Bring your answers to your next review with your advisor, and read Asset rich, experience poor? for what happens when a plan has no why.
Living a fulfilled and purposeful life is as simple as creating a plan that serves your why. Defining that why is the step most people skip. Don’t skip it.
For educational purposes only. Not financial, investment, tax, or legal advice. Talk with your own advisor about your situation.
About the author
Trevor B. Hanson is a wealth manager, the founder of ApexFlow Wealth Management, and co-author of UNSPLODE. He wrote the WealthSpan side of the book.
From the book UNSPLODE: The Bold New Approach to Reconstruct Your WealthSpan and HealthSpan. Read both introductions free.