by Brian Hufford, CPA, CFP
What are your financial dreams? This is one of the inane questions that people who write about money ask. Whenever I hear this question, “What are your financial dreams?” I translate it to “What outrageous things would you buy if money were no object?” I am a watch collector. If money were no object, the outrageous watch I would buy would be a Richard Mille RM008 V2 Split Seconds Chronograph with Tourbillon. It costs $484,200. Half a million dollars would feed a lot of hungry people. So even if I could achieve my “financial dream,” it is unlikely you would ever see me wearing this watch.
I certainly do not have that neighborhood-millionaire mindset either. I would not wear a $100 Timex watch just to see 20 years from now the compound growth in my savings account - an amount that I had accumulated by not having a passion for my watch collection. I am not sure which is worse, financial dreams or the neighborhood-millionaire mindset.
So why do two dentists, with the same income, reach the age of 62 and one has $5 million in savings while the other has $25,000 in an IRA? Is it because the former has a neighborhood-millionaire mindset and wears cheap watches?
I think the reason goes much deeper than that. My own definition of financial success is a balance between supporting needy people in my community, having a great watch collection, working because I want to work, and doing things I love. I have found that, as my accumulated savings increase, I have a great deal more courage to work only at what I love.
During my career, I have observed one trait that truly distinguishes financially successful dentists from their peers. The more of this trait a dentist has, the more financially successful he or she is. This trait is not frugality, like the neighborhood millionaires. I call this trait financial intention.
Intention is defined in the dictionary as the act of deciding on a future outcome or result. In effect, financial intention is imagining a future financial outcome, then arranging your activities to make it a reality. Many people suffer from what I call the Groundhog Day Syndrome. In effect, they have no future. They are just reliving the past, one day at a time. They are happy if another month passes, and they have paid their bills while not accumulating any more debt. Somehow they are unable, or unwilling, to imagine a greater financial outcome than just getting by from day to day.
In my life, I have created a process to help live with financial intention. I call it the Journey of Financial Intention. It has five steps. Let me show you how this process works.
Take a piece of paper and make five columns: Frustration, Principles, Financial Intention, Goals, and Action Plan. I always start the process with my financial frustrations. Suppose one of my financial frustrations is that I don’t know where my cash goes every month. Maybe I am spending too much. In the Frustration column I write: “I am frustrated because I don’t know whether I am spending too much.”
In the Principles column, I examine how my frustration violates my financial principles. So I might write something like: “If I don’t know how much I am spending, I always feel a sense of scarcity and am less likely to achieve my annual giving, watch buying, and saving goals.”
In the Financial Intention column, I list what an intentional solution would look like. I might write: “If I were displaying financial intention for how much I spend, I would start each year with a plan for spending, giving, and saving. Monthly, I would compare my spending with my plan.”
The fourth column is for Goals. Goals have to comply with the SMART acronym, which stands for Specific, Measurable, Achievable, Relevant, and Time-based. My goal might be: “By Oct. 31, I will develop an annual spending plan with my bookkeeper, as well as a system to track spending against the spending plan every month.”
The last column is for Action Plan steps. These are simply the specific steps I will take to achieve my goal.
With this process, I use the emotional energy of my financial frustrations and convert them into financial intentions to create a positive result in the future. Why not convert your financial frustrations into financial intentions with the Journey of Financial Intention?
