HannahMarch 5, 2024
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As financial planners, we hear about “financial freedom” all the time, especially from our clients. It’s a popular goal and one of the most common reasons that people decide to work with a financial planner.
How can you help your clients achieve this goal? You might be thinking the answer is to help them pay off debt or max out their retirement contributions.
But here’s the catch — not everyone equates lack of debt with freedom. Some people aren’t interested in retiring as early as possible — they may want the freedom to travel or work less when they’re young.
So how can you best help your clients get (and stay) on the road to financial independence? It all starts with a conversation.
FIRE Isn’t Always the Answer
Any online search for “financial freedom” will probably lead to more than one article about FIRE, which stands for “financial independence, retire early.” The term was first used in the book Your Money or Your Life, (published in 1992), and the movement has gained popularity ever since.
There are even variations, such as Coast FIRE and Barista FIRE, that offer alternative approaches or slightly different final goals. Whatever you choose to call it, the idea is fairly simple: Waiting until 65 to retire isn’t the only option. There are other ways to approach your finances that may allow you to pursue a different path to retirement.
It’s important to understand that FIRE doesn’t just mean one thing. If you have a client who comes to you and says that’s what they want, it’s crucial to start by defining what that actually means to them.
Maybe they’re thinking about Lean FIRE, which is based on living more frugally now and during retirement. Or maybe they’d prefer Barista FIRE, because they want to work less later in life, but not necessarily fully retire early. Some people just use the term FIRE to refer to a generic feeling of financial independence. But again — what that means isn’t the same for everyone.
Start With a Conversation
We had an Amplified Planning client couple who were a perfect example of this. Jeff & Jenny started off wanting to pursue “financial freedom,” and they believed the best path was for Jeff to start his own business.
After several financial planning sessions, however, this couple realized that all the extra work and stress that came with entrepreneurship didn’t really feel like freedom to them. They decided that sticking with traditional employment was the best choice — the stability and perks of a job aligned more with their personal definition of freedom.
Jeff & Jenny are a perfect example of why communication is so important for financial planners. Without taking the time to dive in and discuss what work, independence, and freedom really meant to this couple, it would have been extremely difficult to create a plan that helped them reach their goals.
So whenever you start working with a new client — especially if they say they want to pursue FIRE or financial freedom — start by opening up the conversation. Ask them what financial freedom looks like to them. What do they picture when they think about being financially independent?
Once you have their answer, you can start making plans for them. But always remember to keep the conversation open. Clients change their minds all the time. Priorities shift, family circ*mstances change, and career goals evolve. Remind every client that they can always change their definition of financial freedom and update their plan to match the new version.
Offer Information and Advice
Some clients might say they want financial freedom but not have any concrete idea of what that means to them. That’s OK too. If you get a client who doesn’t really have a sense of how they view financial independence, start by giving them some information.
You could start by discussing FIRE and its variations. Or you could begin by talking about retirement in general and what they picture when they think about that. You might want to ask about their plans for their family — if a client wants to have children, they may want to focus on making that happen rather than working toward an early retirement.
Once you’ve helped a client define their version of freedom, you can work through their financial plan. You can start by looking at the budget to see if there’s any room to make changes based on their priorities. But it’s also a good idea to see if you can find any unconventional ways to help them reach their goals.
Maybe that means adjusting their budget now to max out their retirement contributions and leverage their employer’s matching program. Or perhaps it would be good to increase their life insurance coverage to ensure their spouse won’t have to work in the event of their death. Be open to alternative approaches, and encourage your clients to share their ideas — they may bring up something you hadn’t considered before.
Want a First-Hand Look at Client Conversations?
Sometimes client discussions don’t end up going the way you (or your clients) expect. With Jeff & Jenny, for example, it was a surprise that they ended up completely changing their position on entrepreneurship vs. employment. But that also shows the power of conversation and why it’s so important to avoid making assumptions.
If you want to see exactly how those conversations with Jeff & Jenny went, subscribe to Amplified Planning Community. As a subscriber, you’ll get access to a new course each month — all of which are based on real-life client scenarios.
This month’s course is all about Jeff & Jenny. You’ll get to hear about their goals and watch them work with an experienced planner to figure out what financial freedom really means to them. Subscribe to Amplified Planning Community for just $30/month!
Categories: Financial Planning
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