Reframing “Enough”: How to Give Clients Realistic Financial Advice
One of the most common questions financial planners get from their clients is the question of enough. You’ll get clients asking whether they have enough money to retire or pay for college or buy a home or take a vacation or whatever. And the tough thing is that it’s not really a question you can answer with a quick yes or no.
The reality is that every person has their own definition of “enough” money. And it’s not just based on what they want to do with their money or the cost of living in their area. A client’s background, values, personal beliefs, goals, and family all play a part in how they view money.
So, where does that leave you as a financial planner? How should you respond when your clients ask you if they have enough money? Or if they want you to create a plan for them so they have enough?
While it might be easy to just give them an arbitrary number, that’s not really the best response. Instead, help them reframe the concept of enough so that they understand how to square the reality of their financial situation with their short- and long-term goals.
Finances are subjective
Strange as it sounds, there’s no such thing as a big or small number when it comes to money.
Obviously, $100 is small compared to $1 million, but that’s not what people mean when they’re thinking about their own finances. The idea of “a lot” or “a little” or “enough” money is different for every person.
You’ll probably have clients who can thrive on $5,000 a month or even less. And then you’ll have others who could never imagine living on that amount, much less feeling like it’s enough to thrive! There isn’t an objective number that is enough money for any given person.
Unfortunately, a lot of traditional financial planning models are built on the idea that you can give each client the same prescriptive number for their budget, emergency fund, and retirement. It would be easier if we could just tell every client to keep $10,000 in their emergency fund or budget $2,000 for a mortgage payment, but those numbers aren’t realistic (or useful) for the majority of people.
So what should you do instead? You have to start by figuring out what your clients want to do with their money and then help them reach those goals.
How do your clients view money?
The key is understanding what each client views as a little or a lot. Spend some time talking with them about their financial history, needs, and goals. How much money is enough for them based on what they want to do with it? Enough money for a frugal single person may be very different than the amount a couple with young children and financially dependent parents needs.
Understanding a client’s financial background and priorities is a good start, but it’s not all you need. You must also recognize how your own values and biases can affect your advice. Every person has a unique money story, including you. Your personal thoughts about responsibility, wealth, retirement, saving, and spending will affect how you interpret your clients’ financial concerns.
What does it really mean to have enough?
In some ways, it’s easier to stick with a traditional financial planning model where you tell each client they need a $10,000 emergency fund and a specific amount in their retirement savings. But those prescriptive numbers only make sense for a small fraction of people.
When you scrap the idea that a specific amount of money is enough, you take the first step toward serving your clients better. You give yourself the freedom to be creative and help each client use the funds they have to reach their financial goals.
Help your clients maximize their money
Every client has unique circumstances, values, resources, and goals. Those things can all affect their views on what a lot or a little money is. The best thing you can do is tailor your advice so that each client gets a plan that fits their needs.
How do you customize your advice for your clients and help them make the most of what they have? Add your thoughts in the comments!
Most traditional financial planning courses are based on objective numbers for budgeting, saving, and retirement. But you’ll need to be a lot more creative with your own clients. And the best way to learn those skills is by seeing them in action.
With our training intensive, Amplified Planning CORE, you get the chance to watch expert financial planners meet with real clients. It’s a great way to see how seasoned planners modify those traditional principles to give every client personalized advice. Get all the details on CORE to see if it’s the right fit for you.
