Financial Planning Is About More Than Money

We traveled in March to Argentina to see our daughter who is there studying this semester. While in Cordoba, a city of 1 million boasting the country’s largest university with an enrollment of 100,000, we rented an apartment and tried to experience as much Argentina life as one can over a two-week span. One day, my son remarked how the lifestyles we saw seemed much less affluent than we’re used to seeing: fewer people own their own cars and houses and apartments are smaller and more modest, for instance. So, with an opportunity to teach a life lesson, I dove into the conversation that “all wealth is relative.”

Now, he and I have had this conversation before. I used to tell him that all the Range Rovers and Mercedes we saw parked at the Ecton Park Little League field didn’t mean all those people had a lot of money – it only meant they spent a lot of money on their cars. So, he knew where I was going with this. Living among seemingly happy Argentinians with no cars at all, though, put another peg in the wealth scale he wasn’t used to seeing. Are these people really happy without all the trappings of wealth we Americans enjoy? If so, how?

We talked about things that really make us happy: family, friends, making the perfect pass to an open teammate, chocolate pie(my suggestion) and how most of those things don’t really require wealth. In Cordoba, the parks near our apartment were filled in the afternoons and evenings with people just sitting and talking – to each other. Yet, it is quite natural to measure how we’re doing by comparing ourselves with our peers. The Pew Research Center says middle-income families in a 3-person household earn between $45,200 and $135,600. Meanwhile, a recent CNBC story detailed the budget of a couple that earns $500,000 per year and felt “average.” That is probably because, generally, the more we earn the more we spend. And when every dollar earned is going back out the door for something, we don’t really feel wealthy.  

We’re often asked by clients how what they have saved compares to others their age. We tell them, “it doesn’t matter.” Why do we tell them that? Because the savings one accumulates only matters relative to how much they will eventually need – not relative to our friends at Ecton Park or in Argentina or anyone else.

That’s what financial planning is all about. First, determining what is important to you in life – now and in retirement. Then, determining how much you will need to accumulate to live that lifestyle. Clearly, that’s easier said than done. We tend to think of our expenses and build from there – that’s a good start – but planning is a good opportunity for introspection and a good plan incorporates what you want to do with your life, not just what you want to spend in your life.

So, where do you self-identify yourself economically? After visiting Argentina, our family may have adjusted our perspective just a bit. Compared to the Kardashians, we’re really hurting. Compared to the average Argentinian – or average American, really – we’re doing quite well. Compared to what the Byars need to live our best lives – that’s the only comparison that matters.

Steve Byars, CFP®