Purpose is the line that runs through financial wellbeing like the proverbial stick of Blackpool rock (or Brighton rock for those down South), writes Chris Budd, and this is particularly true when a person retires. Here, the co-founder of the Initiative for Financial Wellbeing looks at how advisers can help their clients focus on wellbeing as they approach retirement…
Financial wellbeing on purpose
One of the five elements of financial wellbeing is having ‘a clear path to identifiable objectives'. This is actually a pretty decent description for the process of financial planning.
Work out what you want from life, then spend your money on that.
In order to achieve this, however, we first of all need to know what we want from life - what makes us happy. This comes in two parts.
Firstly, what does research on happiness tell us? What are the theories and principles that underpin wellbeing? We will explore many of these in my columns.
The one golden principle underlying financial wellbeing, however, is ‘Know Thyself'. Understanding what will make you happy is the second part to the process. And this brings us to the other major contributor to wellbeing that often gets overlooked: purpose.
Being pulled not pushed
It is much easier to accept change if the result is something that excites you rather than worries you. When advising clients through change, helping them to feel that they are being pulled by something, rather than pushed into something, will go a long way to easing the process.
One of the biggest moments of change in our lives is surely when we move from working to not working. Moving into retirement with something to look forward to will not only make the process a more pleasant one, it actually affects life expectancy.
Retiring with a sense of purpose
A study of 9,050 people in England with an average age of 65 found that those with a sense of purpose over the first 8.5 years of retirement were less likely to die within that period.
The measure that they used to assess the degree of purpose is ‘eudemonic wellbeing'. This means the feeling that what you do is worthwhile. Those in the highest category of this definition of wellbeing lived on average two years longer than those in the lowest category.
Retirement doesn't have to mean no longer being useful. Retaining or finding a new sense of purpose has a direct effect on health and vitality.
What is retirement anyway?
The word retirement doesn't mean what it used to mean. When I started my first ‘proper' job (as opposed to the post university loafing around), a colleague was considering taking early retirement. He had been employed by Sun Life for his entire working career. Not only that, but he had worked in the same office. That is around 45 years walking through the same door every single working day.
Times have changed. I doubt anyone reading this would know someone who has worked their entire life in the same office. This is because we recognise the importance of purpose - and if a job is not providing that purpose, we move to another job that does.
The move into retirement should be no different. And, I would suggest, it is the role of financial advisers and planners to help the client to identify that purpose - that ‘clear objective' - in order to make the financial planning truly meaningful.
Financial wellbeing in practice
A financial plan should help a client to understand how they can use their money to be happier. That includes helping people to find purpose; to realise the meaning behind their pension fund!
Helping clients to work out what they want from retirement, then creating the plan to get there, should mean that the next phase of life will be pulling them towards it, rather than feeling they are being pushed there. It will also mean a happy client, which must surely be the objective of financial planning and advice.
Chris Budd is author of The Financial Wellbeing Book (the proceeds of which go to charity) and founder of the Initiative for Financial Wellbeing. He also runs the Eternal Business Consultancy advising on succession planning and the Employee Ownership Trust
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