The Rebranding of Personal Finance

I’ve been listening to a lot of personal finance podcasts lately, and what I’m hearing suggests that the times, they are a-changin'. “Goals” are out; “stages” are in. “Retirement” is out; “encores” are in. Is anything really different or, just as prunes are now sold as dried plums, are we simply giving new labels to the same familiar concepts?  

Let’s start with goals, the prunes in this particular rebranding effort. If you’ve ever worked with a financial planner, you’ve probably been asked what your goals are. Based on my experience, I’d be willing to bet you answered “I dunno”, “get rich”, or something equally precise and informative. Indeed, for a variety of reasons, many people have never made the connection between their money and what they want to get out of life. Even fewer have translated that into the SMART (Specific Measurable Attainable Realistic Time-Based) goals that financial planners seek.

The thing is we planners like to know what you want your money to do for you since that has a significant effect on our recommendations.  Traditionally, we’re looking to pin you down to statements like these:

  • I want to retire when I’m 55, maintaining the same lifestyle but spending twice as much on travel.
  • I’d like to pay for 100% of my kids’ college costs, even if they go to NYU. They’re 11 and 14 now.
  • I want to buy a vacation home in Tahoe Vista before the snow falls.

The problem is that few people have such well-defined visions of their future.  Even if they do, life happens and maybe a home in Tahoe Vista doesn’t.  So the planning process ends up requiring us to make assumptions that invariably turn out to be incorrect.

Not that there's anything wrong with that.  Seriously. Whatever its flaws, this process works sooooo much better than not planning.  Or as Dwight D. Eisenhower more eloquently put it, “Plans are worthless, but planning is everything.” Still, the process can be at least somewhat artificial and awkward.

Now things seem to be evolving toward language that might better map to real life. Instead of trying to force unforeseeable details on people, a new model has us thinking about moving through a progression of stages.  Each one is incrementally more financially secure, but flexible, more readily providing for freedom to choose how to direct one's resources as conditions evolve.  Milestones along the way provide a roadmap for gauging progress without being overly restrictive. 

But does this new concept of thinking about one’s financial life as a series of stages amount to something better tasting, or is it really just “dried plums”? I suspect it does, and I’ll be exploring that in upcoming posts.