By R. Todd Holden | Wealth Advisor
Northwest Financial Advisors

There are things in life that have value, but on which we cannot put a price.

In 2013, it was time to replace the original aluminum siding on the house. Being somewhat thrifty by nature (some would say cheap), I wanted to install vinyl siding which is what all our neighbors had done. My wife, who did not always appreciate my thrifty ways, wanted to use Hardie^® board, a cement-based siding that looked nicer than vinyl. This was going to cost an extra $10,000.

She won this battle, and I’m glad she did. For the next ten years, I drove home every day and thought that I had the nicest house in the neighborhood. I was proud to call it mine and felt good about my home. I cannot put a price on this feeling, but it was worth a lot to me.

From a business perspective, this has often led me to ponder, “How do we value things that bring us joy or peace but on which we cannot put a price?” For me this was driving home and appreciating my house. For my retired clients, it is often enjoying a good night of sleep without financial stress. Much like my feeling good about my house, it is difficult to place a value on sleeping well.

I have come up with a bit of a methodology for sorting these items out. Generally, it goes like this:

1. Can I afford it? We could afford the fancy siding.
    
2. Will it continue to bring me joy/peace in the long run, or is it temporary? I enjoyed driving home and admiring my house for ten years.
    
3. Does it come with an ongoing expense? The siding was a one-time expense, whereas a fancy car or second home comes with future costs.

For clients this leads to specific questions such as “Should I pay off my house?” “Can I afford a vacation property that my family will want to visit?” “Can I take that extra trip this year?” These are the type of questions to ask your financial advisor who has helped other retirees grapple with them.

The financial advisory industry has changed drastically since I entered it in 1987. At that time, it was all about investment returns. Clients had large pensions and small retirement accounts. Now, it is much more about planning and strategy as clients have small pensions and large retirement accounts. Clients are responsible for managing much more of their wealth/financial success than they were a generation ago.

I have found that clients who have some sort of base financial plan enjoy retirement more because they have less financial stress. We discuss their plan more than their accounts. They want to know, “If I [fill in the blank], will my plan still work?”  From an advisor’s perspective, it feels great to tell a client, “Yes, you have planned well, and you can afford to [fill in the blank again].”

If you are within 5 to 10 years of retirement and have not built a plan with your advisor, please do so. In my experience, clients who have built a retirement plan are more confident in their ability to maintain their lifestyle and more comfortable spending money — and that is what most retirees want more than anything.

The information in this article is for general purposes only and not intended as specific, individualized advice. For personalized advice, we suggest consulting with a qualified financial advisor. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.