What is Financial Life Planning?

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Finances touch just about every aspect of your life. Your personal life and your financial life are not separate — they mingle and dance a complicated dance. While it’s important to have the right amount of money in emergency savings, retirement savings, and insurance coverage, it’s also just as important to live a full, rich life. Your money should not only provide a safety net but also a means to reach goals and accomplish great things.

Thankfully, there are financial planners who focus on helping clients effectively manage their finances while also reaching personal goals, as opposed to just focusing on the numbers. This approach, called financial life planning, makes a conscious effort to keep clients’ life goals in mind throughout the planning process.

The Cheat Sheet chatted with Michael Kay, certified financial planner, financial life planner, and president of Financial Life Focus, to learn more about how financial life planning works.

“Financial life planning is an approach to financial planning that brings together quantitative data with qualitative information. The quantitative side is the normal numbers side. The qualitative is the deep understanding of what people care most about, their values, their money mindset (how they approach money), and their fears. We understand that the emotional/behavioral side of money can lead people to great success or massive problems. Financial life planning helps people and the planner understand how to best help a client live their values,” said Kay.

He warns that only focusing on the numbers is not sufficient. Clients need to have balanced advice in order to realize their full potential. “Anyone who is a true practitioner cannot ignore the qualitative aspects of the clients. To rely solely on the numbers is to reduce people’s lives to numbers on a page,” said Kay.

Here are four things to know about financial life planning.

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Source: Thinkstock

1. It is not psychotherapy

One misconception about financial life planning is that it involves therapy. While part of the process centers on uncovering some possible causes for the way you currently manage money, you will not be receiving psychological treatment.

“The greatest misconception is that financial life planning is psychotherapy. It is not. While the conversation is around money history and helping clients open their understanding to the root of their money beliefs, it is not therapy. However, the effects can be therapeutic,” said Kay.

If you feel that you need therapy for money problems, your best bet is to start by seeing a financial therapist. It is very important to seek help if your financial situation is making you to feel depressed or causing significant long-term anxiety.

“Some believe that financial life planning is some mystical, new age, woo-woo out there fad. In fact, it is in complete alignment with the CFP Board of Standards regarding knowing your client.  Without understanding people’s beliefs, background and attitudes about money, how can a planner really do a thorough job of preparing a plan that the client will own?” continued Kay.


2. There are some elements of life coaching

Financial life planning will require you to examine your life and understand which goals are most important to you.  From there, you and your planner can work together to see how you can best align your goals with your financial situation. Part of the financial life planner’s role is to gather enough information about your values and goals so that he or she can help you live your best life.

“Financial life planning can somewhat take on aspects of life coaching as it helps pinpoint life transitions, challenges, and other aspects that are directly related to money. The life coach does not, as a rule, bring the money into play. The FLP practitioner sees the tether between life and money. For example, retirement — not only is it vital to understand how someone will spend their time, but what is the financial cost?  People talk about travel, but one can take a bus tour or a luxury cruise around the world. They are both ‘travel’ but have vastly different price tags,” said Kay.


3. Find a reputable planner

Certification as a financial life planner is not a standard. However, Kay says formal training is recommended in order to best serve clients.  If you are interested in working with financial life planning, your best bet is to work with a certified financial planner who also has training as a financial life planner. The Certified Financial Planner Board of Standards has a searchable online directory. Once you find a planner, you can call and ask about his or her training in the area of financial life planning.

In addition, Kay recommends searching for a financial life planner through Money Quotient, a non-profit organization that provides advisor training. “George Kinder offers training, as do several other firms. Their websites generally list advisors who have done the training and to what extent. That’s a good place to start,” says Kay.


4. Be prepared

During the process of exploring your goals, values, fears, and desires, you may have an emotional reaction, says Kay. It can be difficult to uncover dreams and wishes that may have been pushed aside for years. Know that emotions may run high during your meeting with a financial life planner.

“Clients can experience emotional reactions and tend to talk about issues they might not have thought about or considered before the conversations around money began.  Advisors need to ‘be with’ the client on their journey and not try and sweep real emotions under the rug or toss out unwanted platitudes because they are feeling uncomfortable.  Financial life planning connects life and money and that combination can be tumultuous. Our job as planners is to help, advise, and support our clients through their journey. It requires intelligence, empathy and patience.  It is the most meaningful work I can imagine,” said Kay.

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