Pain Can Be a Teacher

Pain Can Be a Teacher


The pain on the inside of my left knee told me to go see my doctor. The pain was costing me too much time and focus. From x-rays we were able to see the source of the pain: missing cartilage. He gave me a shot of cortisone, which actually worked. He then suggested I go to a “knee class” at Kaiser -Hospital where I learned different stretches for my condition and others for strengthening surrounding muscles. I do these stretches and exercises religiously because I don’t want to be in pain like that ever again. Now I am 98% pain free and losing weight which will also help to avoid this kind of pain in the future.

This experience and my response made me think of a very successful client couple who for many years embodied a certain attitude about financial planning that rolled out something like this:

We don’t relate to financial planning. Our take is that we work very hard, we make as much money as we can, we save and invest as much as we can, and we’ll get what we get. How is financial planning going to change that?

This was their take for many years until 2013. What made the difference? Pain. Their hard work, including long business trips, had become more and more difficult as they approached 60. What had been a normal pace of working became painful in a way they had never experienced before.

Making Pain Go Away
This winter, as I was talking with these clients about their new pain, I suggested it might be somewhat alleviated if they knew a date, well-grounded in facts and numbers, by which they could begin to back off from what had become a grueling pace—though I hesitated to call this financial planning. They agreed that if they could begin to see the light at the end of the tunnel, it would help. As things were, there seemed to be no end in sight to their stress.

The Process of Financial Planning
We met with our clients to determine their current living expenses and began to identify those that would change in the future. We found these: 1) their daughters would both complete college and become independent; 2) their mothers would not likely live much beyond 100; 3) they would sell their second home; the home mortgage would be paid off, etc. We also helped them to specify their real budget. Because many people bristle at the word “budget,” we substitute “spending plan.” They are essentially the same thing, but “spending plan” sheds a different light on the subject.

Next, we identified all of their assets that would support their plan for retirement. These clients are very talented and energetic so ceasing to be engaged and productive is not part of their DNA. We came to a conservative assumption of what his and her income would be when they both reduced their working hours. Knowing what they would need to withdraw from their capital at work after-tax, we could determine the optimal investment strategy to fulfill their desire for cash flow.

Planning is Fun
We sent them a few planning scenarios electronically—including success probability analyses—(sometimes referred to as Monte Carlo analyses). The scenarios included a travel budget of $50,000 annually. This resulted in a work back-off date that was not soon enough for them. They were still in pain, so we invited them into our office in order to work with them in real time. We adjusted this and that and ran different reports based on different scenarios. When we reduced their travel budget to $25,000 annually, BINGO! That gave them a date that made them smile. In all these years, I have never seen them happier about the future.

Planning Helps Make the Rest of Your Life Work
Now, every time we meet with these clients, we update their plan to put their probability of success score in real time. Now they focus on what makes their lives work. Their careers are satisfying but won’t be at this intense pace forever. They have clarity about their EDR (Estimated Date of Retirement). This produces peace. That peace produces smiles. Don’t settle for being in pain. Allow your pain to point the way to getting better.

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