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  • j.p. morgan private bank

How to add purpose in planning your financial future

First define your intentions—what do you want to do with the wealth you’ve created?

How to add purpose in planning your financial future

Consider your career and the qualities most important to your success. Chances are, it’s been about much more than just hard work. Through any number of challenges you’ve set clear goals and pursued them diligently. You’ve mapped out where you are and where you want to be five, 10, or 20 years down the road. And you’ve plotted careful strategies to get there.

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But what about the rewards of all that effort?

When it comes to their personal financial lives, “many executives, business owners, and entrepreneurs do things by default,” says Michael Liersch, PhD, global head of wealth planning and advice at J.P. Morgan. Amid the daily pressures, it’s easy to assume you’ll have time later to figure out what to do with the wealth you’ve created. Many high achievers “think of money mainly as a measure of their success,” Liersch adds. Thus the default planning may amount to “more is better.”

Yet leaving personal financial decisions for later or assuming that things will simply work out could mean that the ultimate payoff—the life you always said you were working towards for yourself and family—does not do justice to the career that got you there.

THE PURPOSE BEHIND THE DOLLARS 

As a behavioral scientist, Liersch advocates a more “intentional” approach to personal finances. “When we talk about planning one’s financial life with intent,” he says, “it’s about examining what’s going on today, being honest with yourself, and asking, Is this the path I want to be on?”

An intentional approach involves more than deliberate planning for a child’s education or saving towards your dream house. As important as those goals may be, the process starts by considering at a very basic level what impact you want your wealth to have. Or, as Liersch puts it, “What path do you want your money to take?” While the things you might buy are nearly infinite, these strategic paths boil down to a handful of possibilities:

  • Spend. You want to support your life and family and philanthropy in the here and now. You’ll spend everything within your lifetime.
  • Divide. Your goal is to accumulate a certain amount of wealth to leave to your beneficiaries.
  • Preserve. You see your wealth being preserved not only for immediate beneficiaries, but also for multiple generations to come.
  • Grow. Your wealth is the start of something even bigger, a family tradition that future generations will nurture and increase for many years to come.

CHALLENGES AND OPPORTUNITIES

Depending on what you see as the future of your wealth, you can then start to think about how to structure your assets to give you the best chance of getting there. Each path will require a unique set of decisions—none of which is simple.

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For example, while spending all of your money during your lifetime may sound like the easiest choice, it could present thorny challenges. Since few of us know how long we’ll live, spending could easily drift into overspending, with the risk of running out of savings with years left to go. You’ll need a careful asset-allocation strategy structured to provide income for spending, along with growth for decades of life to come.

The desire to divide your wealth among loved ones starts with the best intentions and deepest love. But failing to divide equitably or clearly communicate your intentions could mean those good intentions backfire. “It’s easy to assume that people will be grateful for getting something,” Liersch says. “But that’s not necessarily how human beings work. When they receive money, they want to know why you gave it to them and what they’re supposed to do with it.” Failure to provide that explanation, Liersch adds, “can be confusing and potentially lead to unintended consequences.”

Likewise, preserving or growing wealth for generations to come presents complex issues around estate and trust planning and how to balance current needs with the desire for a legacy that will live on. Preserving wealth over generations also requires the buy-in of your kids and their kids, which in turn necessitates carefully building a culture of the values that wealth represents for your family.

SHARING YOUR VISION

The early stage of becoming more intentional about your money involves solitary, personal reflection. “It’s a time to articulate your vision on your own,” Liersch says. Sharing these ideas with others, even loved ones, before you’ve thought them through on your own, could lead to misunderstandings.

“The second step is to communicate with someone you trust to help make decisions. That might be a spouse or partner, parent, child, or an advisor,” Liersch says, adding that as your goals come into focus, you should widen the circle to include other family members. In this way they can understand both your intentions and their expected roles. “It’s about setting up a common mission, with policies, guidelines, and responsibilities, just like you would in a business.”

OVERCOMING THE OBSTACLES

For every potential problem there are achievable solutions. The key is to get past the inertia that often prevents us from getting started.

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Indeed, the thought of describing our dreams may at first seem unnerving. “Say I’ve built my whole identity around my business and sacrificed time with my family because I really wanted to make sure it was successful,” Liersch says. “And now I’m going to assess what I really want that money to accomplish.” A close examination could reveal that the future you thought you were working toward isn’t the one you long for after all.

While understandable, such concerns only underscore the importance of becoming more intentional about your money right now. You may have to pivot, adjust, and do some serious thinking about your long-term goals. The good news is, you’re already great at that—essentially, you’ve been doing it for years.

You won’t have to learn a new financial language or master a new set of skills to become more intentional about your wealth. “It’s not really a foreign concept,” Liersch says. “It’s about overlapping your best practices from business onto what may matter just as much or even more—your personal life and your family.”

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