What are the three most important questions you need to answer before making a life or a financial plan? The ‘father of life planning’ George Kinder tells you
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Dubbed the “father of life planning” and author of the seminal book on money, “The Seven Stages of Money Maturity,” George Kinder has been an investment and wealth professional for more than 30 years, coaching thousands of advisers on how to do more than just talk about financial products, but how to get to the root of what people really want in life before creating a financial plan to make it happen.
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TRANSCRIPT: [Duration: 21:09]
Jenny Hoff: Thank you so much for joining us today.
George Kinder: Hey, Jenny nice to be here.
Hoff: So first I’m going to talk a little bit about your background. You take a very spiritual approach to money management and understanding finances. You’re considered the “father of the life planning movement” which I want to discuss in a moment. But first, can you talk a little bit about your background and how this came to be. What did you find was missing in the discussion over our financial lives?
Kinder: Spiritual is certainly something that can be involved in our work but I think personally, I think it’s more about freedom and layers of freedom. What’s really missing in discussions about money is \u2018what is the purpose of money’? You know we think that we need to earn more in our investments, we need to reduce our taxes, we need to save if we’re you know, trying to do an estate plan, we need to address our budget and what happens in financial advice is we forget what the real purpose is. All these things are helpful. It’s certainly helpful to have a sensible relationship to money but what we really want is we want our lives to be just rich and fulfilled and fun and meaningful and engaged and profound. And so the questions that I teach, the way that I teach financial advisers to work with their client, it’s all about what does freedom mean to you? What would actually give you freedom in your life? And the spiritual aspect just simply one of five different areas that come out of people’s response. It’s a fairly common one after family. I think the most important thing to people has to do something with their values or their spirit or explicit religious practices so, and not for everybody, but after family, it tends to be the second most important thing.
Hoff: And how did that come about? You have an interesting background, a strong financial background but from what I understand, you also have a bit of a spiritual background when it comes to meditation. Can you talk a little bit about that and how you were able to combine that in your own mind as well?
Kinder: I’ve been a teacher of mindfulness, meditation practices for almost 30 years and over that time I’ve also led many week-long silent mindfulness space meditation retreats. How it came about early on for me was that I would have actually preferred to live a life more as an artist and as a spiritual practitioner than as a financial person. But I had to make a living like most of us and my skills were in mathematical and economic areas and so, I dove into tax work and then developed a financial planning practice and then became a money manager over time. And then eventually, because the way I worked with clients had great respect for what they might be missing in their lives. So in my experience, with most of my clients was that when you got beneath the money aspect of the taxes or the investments, they really wanted something out of their lives that they weren’t quite delivering. And my passion became as it was for my personal life, it became \u2018how can I help this person to deliver that?’ That’s what’s really important. How do we shift the focus? We’re not just talking about the numbers. We’re talking about what they really want. And then, that will make my work as a financial person much more accurate because I\u2018ll know whether they can tie up their money for a period of time or they can’t. I’ll know if they really want to buy this expensive large house or that buying the house at all would harm, would save really your passion about, which is having a great relationship with your family or playing jazz in a club on Tuesday night. So I became much more interested in people’s understanding of what freedom meant to them. And that’s really what finance should be all about.
Hoff: I really love that philosophy. I think that a lot of times we don’t actually take that moment to think about what we want and why do we want the money for that reason. And we think well we have to buy the house, we have to buy the car because everybody else is as opposed to what gives us actual pleasure. So I want to talk a little bit about your institute. You have the Kinder Institute of Life Planning. Talk about how that’s different from just financial planning. Sometimes we think OK, we need a financial adviser and financial planning and you talked about it now, a little bit on how you want to bring in life goals when doing financial planning.
Hoff: Can you talk a little bit about life planning?
Kinder: The way we understand life planning is that life, just as I was just describing it, it’s something that has to happen before you start to think about and talk about the financial pieces, otherwise you don’t know what the budget is for. You don’t know what the investments are for. Therefore, you’re likely to make mistakes and you’re likely to be holding yourself back from what you really care about. So, the Kinder Institute of Life Planning does something for consumers, it does something for advisers. It trains advisers in a life planning methodology that we call EVOKE which is a 5-step process that we take our clients through so that we’re confident that as we deliver the financial aspect of life planning which is the final bit, that it’s going to deliver for you, for the client. So we train the financial adviser community primarily in the first three phases of EVOKE which are what sometimes people call life planning. It’s that first three phases of financial planning and they have to do with, first of all, building a great relationship with the client so that they love talking with you and sharing who they want to be. They feel trust toward you and that’s a major issue these days with, in our world. Period but also particularly with financial advisers. So we train them in great listening skills and then the second phase of that life planning engagement is what we call Vision. And EVOKE is an acronym so E stands for exploration, and V stands for vision. And in the vision meeting we have an engaged conversation talking about what it would be most exciting, what would be the most exciting life for a client and the most meaningful life. We have a series of questions and exercises that get at that. And then the third meeting is the obstacles meeting where we deal with the obstacles to that life. So, for consumers we provide a list of three thousand financial advisers all over the world. We’re actually in 30 countries on 6 continents who have gone through our program. For financial advisers, we provide training so that they can address these issues with clients.
Hoff: And so part of life planning, I believe, from what I understand reading your work is asking the right questions. And I read in a couple of pieces that you talk about three main questions that you encourage people to ask themselves regarding their life’s goals and values. What are those questions and why are they important for us to think about? What would the answers teach us?
Kinder: It’s the three questions that are a part of one of the series of exercises. We have I think four major exercises in the vision aspect of life planning. And the three questions are the ones that are most famous and they start off with just a question really about money that if you have all the money that you needed for the rest of your life, what would you do? And you know, it’s like winning the lottery or you know, you may not be as rich as the Queen of England but you’re well enough off that you can do what you need in your life, need to do, feel called to do. And that’s a wonderful question to play with. The three questions we do, we do them in order. So the first one allows you to really look at all the different things that would be fun, engaging, exciting, profound, meaningful, touching for yourself in your life, filled with accomplishment or success or however you define it.
The second question goes really significantly deeper and it’s a question that if you suddenly discover you only have 5-10 years left to live, what would shift for you? How would you live your life then? What would you do? And of course when we’re faced with our mortality, we would begin to think differently. And so the questions, they may overlap the first question. The answers may overlap. But they’re often more personal, more deep, and in some way more important. Very often family and relationship comes up, not always, but very often and then the other thing that comes up are the areas where you feel a commitment, some kind of personal legacy for yourself. So it’s deeper, it’s more important, these are the things that are really urgent to be done and there are things that we focus on in the life plan.
But the third question is the question that is the most important question of all for most of us and it goes even deeper and it’s, if you were suddenly told by your doctor that you had an illness that has come to term and you only have 24 hours left to live and you were completely shocked by this and reflecting on all the things you wanted to accomplish in your life, all the things that you anticipated doing. What did you miss? Who did you not get to be? What did you not get to do? And it’s that question that is really the heart of the life plan because that question is the life or death question. It’s the question of meaning. And again, the areas that come up, most significant area for most people is family or relationship. The second most significant one is what we call values or spirit. The third most significant one that was a surprise to me and that is creativity. People are enormously creative, long to be more creative than they’ve been. Sometimes that’s with business but often it’s with the arts and with culture. The fourth most common response has to do with giving back to community. And the fifth most common response has something to do with our relationship to our environment. It could be just we live in the city, we want to live in the country or vice versa or it could be concern about planet earth. So those are the five things that tend to come up. And those are the things that we craft the financial plan around and when you do that, when you really tap into the meaning of the person’s life and you bring the finances to there on that. The client or the consumer is so excited. They’re so thrilled, they have so much more energy in their life because they’re adjusting to what’s really important to them and they’re making it happen and we make sure that these things occur. Most of them occur within one or two years.
Hoff: Oh wow. So, you take in then all of the things that they say that they would have really missed out on and the things that they would have been a tragedy that they didn’t get to do and that’s how you craft the life plan. Can you give us an example so that how would we then craft our life plan? Would it be how you invest your money, how you save your money, how you spend your money? Can you give us an idea of that?
Kinder: Yeah. Well, first of all, let’s take a person. Let’s say that they wanted to go to Africa. They wanted to move to Africa and that they wanted a better relationship with their six year old and maybe they wanted to live with more integrity, more honesty in their lives somehow. So, the Africa piece is pretty clearly a question that would involve finances and would involve planning and budgeting and do they have the appropriate savings, could they actually do this? And what would be the economics be in Africa? So it involves strategic planning and scenario planning around their savings, their investment, their income and expenses. The question about their six-year old son is more personal but in some ways it’s more urgent because it’s carrying a burden on them every day, most likely. It’s their engagement with their son on a regular basis but they don’t have that so that’s something that we actually help to inspire them to get moving on right away and we’ll actually talk about what are you going to do tomorrow? And what are you going to do this week and how would you and how much time do you need to make that happen and when would it occur and what would be enough. So we look at that and of course, there are some financial ramifications there. If you need more time in your life, if you needed an additional 20 hours a week, for instance, that would clearly edge into your, quite significantly, perhaps into your work life so that could be economic significance but there might not be. If there isn’t, then the thing that’s going to happen is you’re going to get a lot more energy by solving it and there’s going to be a lot more energy for your economic life. And then the third piece about maybe having more integrity or honesty. They may be caught in a job, say they’re in a sales job or they feel that they’re leading a client toward a sale but sometimes they’re not sure that it’s really the very best thing for that client. Well then we’d be looking at what’s happening with their job and if there’s a way to craft that job in a way that has greater authenticity or greater integrity to it or if there are alternative professions that they would feel more inspired by so all of these things clearly have to do with finances. The one that’s most explicit there is the Africa but it could be that if you decide you wanted to move your job that once again, this question is retirement, savings, and what is your savings for? Where you live and how you’re managing your budget, all of those things, can be very important in times of transition but then also if you shift jobs, you shift professions. You’re shifting then probably for decades and so there’s this implications in terms of long-term planning. That’s what’s out there.
Hoff: That’s great so yeah, it really shows how it’s all intertwined and even things that you think have nothing to do with money could end up having to do with money in your work and how you have to think about it. Let’s talk about somebody who maybe doesn’t have much money to even go see a financial adviser. Perhaps they’re in debt, severe debt, and they just want to build a secure financial future rather than living pay check to pay check. What would you say to them? What questions would you ask them to help get them on the right track?
Kinder: Fantastic. First of all, I would say to them, I’m a hundred percent with you. I can see why you’re so challenged by this and why do you feel this is terribly important. Let’s make it happen. First thing I do is really give them encouragement and they know that I’m on their side and we’re going to do it. And then I’d say, you know what I’ve discovered over time is that the very best way we’re going to accomplish this is to start off by thinking, who is it that I want to be and where is it that I want to go? And once we have that or arrive that, then we can look at, what is the financing going to be of having that trajectory in my life and what are the financial requirements. What are the income and the expenses that are likely to be there as well as the requirements for that? So once we have that, then we can get down and look at the practical aspects of reducing the debt, of increasing your income, perhaps reducing expenses. All of that.
Hoff: OK, so it’s really again people just have to, it’s about focusing on the right questions. It’s about knowing where you want to go before you start to plan on how to get there. What do you think most of us are missing in our lives when it comes to really understanding how are money should be working for us?
Kinder: I think most of us don’t pay enough attention to what freedom means for us. There are certainly elements of finance that we all could learn more from. But I said the first thing is, what does freedom really mean for us and that’s the life planning piece. And then I think, probably the second most important thing is where can we find great advice and advice we can trust? There’s a huge amount of conversation right now in the press about the fiduciary rule about having to do with pensions and this question is should advisers have a fiduciary obligation to their clients? And most people in America don’t even know what fiduciary means, I suspect. And even in the press, I don’t think that they’re understanding it fully because most of the definitions of fiduciary has to do with how advisers earn their fees whether there’s conflict of interest between the advice they give and the products they’re offering or selling. Yeah I think that’s part of fiduciary means but fiduciary really means a really trusted relationship with the client and that trusted relationship should go right to the bone marrow of the consumer that there should be a heart to heart mentor like relationship between a financial adviser and a client. And right now the trust level toward financial advisers is so low from the years and years that advisers have primarily been sales people and even doubled up and made much worse by the banking crisis of eight years ago. So I said the second most important thing is \u2018how do you actually find a financial adviser who you can trust?’ and fiduciary is one of the keywords to it.
Hoff: OK, a fiduciary is somebody who’s going to be working in your best interest, right? And not necessarily like you said, having a conflict of interest where they can make more money off of a different suggestion.
Kinder: Yes, that’s the classic definition most people would call themselves fiduciary would have that. I would argue that in addition, you can’t possibly be a fiduciary without doing life planning. A lot of people who call themselves fiduciaries are not life planners and I think that’s a failure of understanding the term.
Hoff: So what can listeners do right now to feel more confident about money management? To take the advice that we give in this podcast and advice that they get elsewhere and put it into practice right now.
Kinder: Well, we have a completely free, there’s no ads on it. Completely free consumer website called LifePlanningForYou.com and they can go to that website and if they cannot afford to hire a financial life planner, they can go to that website and do a pretty good job of their own financial life plan on that website. Once they have that in hand, then if they were go to a financial adviser, financial planner who is a fiduciary, I think they could do really a pretty terrific, terrific job with their financial work.
Hoff: Could they do it on their own in a sense? Are there tools out there where they can figure it out on their own if they’re just not in a financial place to hire anybody at the moment?
Kinder: I think there are many tools now online. Many of those robo-advisers do very low-cost, high-quality investing so there’s a way of doing the investment piece online and then more and more, and I suspect you and your podcast will have more of the financial tools that are available also online for general financial planning.
Hoff: I also want to ask about spending money. What kind of things can we do to spend money with a purpose instead of just spending money? You mentioned it might not be in your best interest to buy a house ’cause that might impede on what your real desires are so how can we spend money with a purpose and know that we’re actually fulfilling those life goals?
Kinder: I think the first thing is not isolating the question to a transaction. I think that if we discover what our purpose is and we are on fire to accomplish it, then I think every single purchase that we make is spending money with purpose. That’s shopping for groceries, you know, paying the rent, everything that we do is filled with that purpose. And that’s where I would aim rather than looking at individual purchases.
Hoff: Alright and finally our podcast is called Charged Up. What charges you up about helping people create both life plans and financial plans or rather, life planning.
Kinder: What charges me up is that this is really a movement that’s happening. There are three thousand people in thirty countries on six continents and each of them probably has as many as a hundred clients. So we’re talking about three hundred thousand people every year that are learning to live and with greater freedom. So what really charges me up is that people coming out of a life planning engagement are fired up about being who they really want to be rather than being lost and kind of financial detail.
Hoff: Alright, good note to end on. Thank you so much for joining us today.
Kinder: Jenny, it was a pleasure. Thank you so much.
See related: Charged Up! podcast: Becoming the boss of your career,