Financial Opinion and Insights

Does Your Money Have A Purpose?

Jim Lorenzen, CFP®

Jim Lorenzen, CFP®

A senior executive of a high-tech company loved his company stock.  When it was at its peak, he’d tell all his friends about how well he and his company were doing.  His advisor suggested he sell at least some of his $10 million in vested holdings, especially since he had plenty of options yet to vest and he had few other assets.  No one could convince him about the dangers of his highly concentrated position.  When asked what the purpose of his money was, he could never articulate it.  He rode the stock all the way down to zero.

Then there was Margaret (not her real name) who loved investing.  She didn’t mind taking risks because she felt she had plenty of time to make up any losses.  She enjoyed trading with an online broker and began to equate risk with reward.  The more she made, the more she wanted.  When the markets tanked in 2008, her investment account lost more than 90% from its high and cost her half her original investment.   She may have had a goal – who knows? – but, it’s evident she never considered her purpose.

Purposes are different from goals.   Purpose goes beyond goals.  It’s the reason we have goals. 

“I want to retire at 60 with $10 million” is not a purpose.  It’s a goal.  Why?

“I want to be financially secure” doesn’t go deep enough.  What does financial security mean?  If you mean you want to maintain your lifestyle, you should be able to describe exactly what that lifestyle will look like:  Will you sell your home and relocate to a warmer climate?  Will you travel the country in a motor home or will you live in a house and travel?  Are you going to keep that waterfront summer cottage or sell it?  Tell me what each one of these decisions means to your quality of life.

Believe it or not, some people will say the purpose of their money is to provide for their retirement and their children, then they’ll fly to Europe for a first class vacation, neglecting to fund their pension for that year.

The point:  Does your money have a purpose?  Once you have a purpose,  you can set goals around that purpose –  and yes, you can have more than one purpose and each can have more than one goal attached.  But, your second question is key:  Do your actions match your purpose? 

To get to any destination, it helps to have a roadmap.


Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER™ and in his 20th year of private practice as Founding Principal of THE INDEPENDENT FINANCIAL GROUP, a fee-only registered investment advisor with clients located in New York, Florida, and California.  He’s been a headline speaker at conventions throughout the United States, Canada, and the U.K. and has appeared in `The Journal of Compensation and Benefits’, as well as in The Profit Sharing Council of America’s `Insights’.    Jim has also appeared on American Airlines’ `Sky Radio’, heard on more than 19,000 flights.  IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description.  Nothing contained herein should be regarded as tax or legal advice and the reader is urged to seek competent counsel to address those issues.   The above represents the author’s opinion and should not be regarded as investment advice which is provided only to IFG clients upon completion of a formal financial and investment plan.   For questions or comments, you can reach Jim at 805.265.5416 or through the IFG website, http://www.indfin.com.