Financial Fitness Basic Training – Lifestyle Design Part 1

Tim Ferriss is the author of “The 4-Hour Work Week: Escape 9-5, Live Anywhere, and Join The New Rich.” I read this book while I was in college. It is an interesting read and certainly inspiring. Who wouldn’t want to do all those things mentioned in the title?! There have been dramatic reactions to the book. Plenty of people agree with his ideas and plenty  think they are unrealistic. I won’t make a statement one way or another. One idea I do want to touch on is lifestyle design. According to Tim, “The New Rich are those who abandon the deferred-life plan and create luxury lifestyles in the present […]. This is an art and a science we will refer to as Lifestyle Design.”  

For me, lifestyle design is about enjoying your life today and every day, not just in retirement. It can be viewed as the entire purpose and benefit of our financial fitness program. Just as with physical fitness, financial fitness is a lifelong process that is vital at any age. Additionally, the whole point of financial planning is helping people achieve their goals. We just focus on those goals that help you enjoy your best life today and in the future.  

Your ultimate goals and priorities, which we’ve discussed previously, are the first step in your lifestyle design. What follows are additional financial fitness components that fall under this area.  

Lifestyle Design Component #2: What Is Purposeful Work-Life Balance?  

Work-life balance, or lifestyle balance, is the balance between your life at work and your life at home. A good balance between the two is considered a huge contributor to physical and mental health. However, this balance is also crucial to your financial fitness.  

Most of us have one particular asset that has far greater value than anything else we own. That is our human capital. It is the summation of all the income we earn over our lifetime. Having a purposeful balance to your work and life is an important key to maximizing that human capital. Below are some big picture steps to doing so:  

  1. Find your purpose: something you are good at, can be paid for, enjoy, and is in demand.  
  2. Find work within that purpose.  
  3. Strive for a good balance between that work and other personal passions and pursuits.  This helps you avoid burnout and can prolong your working years. That, in turn, will undoubtedly increase your human capital.   
  4. Work hard, play hard. 

If you work with a financial planner, part of their value should be getting to know you and your goals. That should be the very first step in their process. This includes what different types of work give you purpose in life. For some, a major financial goal could be changing jobs. Having a career you enjoy and can do indefinitely can have an incredible impact on your lifestyle.   

Lifestyle Design Component #3: What Are Lifestyle Projections?  

Your work-life balance feeds directly into lifestyle projections. You can think of these as traditional “retirement planning” on a much more comprehensive level in regards to goals. I dislike the concept of retirement. Go to school, work hard until you’re sixty-five, then you can try to enjoy your life. Is that what you want? I don’t think so. It’s no wonder many put off actually planning for retirement until they’re five to ten years out. Who wants to sit down with an advisor who tells them to just keep working and saving more and more for twenty to thirty more years? I wouldn’t.  

We like to repurpose the idea of retirement and instead focus on your lifestyle, both now and in the future. An advisor shouldn’t just look at your income, how much you want to spend in retirement, when you want to retire, and tell you how much you need to save. We should take a deep dive to figure out what is important to you, what your best life would look like, and help you come up with goals for the present and the future.  

Lifestyle projections let us see the progress we are making. Do they include projections for your progress towards traditional retirement years? Of course, but they also take into account big goals you have along the way. These include much shorter-term goals like travel, a new home purchase, etc.  

Lastly, many who have found purposeful work may have non-traditional “retirements.” Take myself for example. I love what I do, and as long as I am able, I plan to do it in some capacity. So I may not drop completely out of work at 65. I may just work less until 70, then even less until 75. Similarly, others may have a side business they always wanted to start. Alternatively, they may have some way of making money doing something else they enjoy. The key is finding a way to monetize that purposeful work we discussed above. It can have an incredible impact on your financial fitness.  

Lifestyle Design Component #4: What Is Legacy Planning?  

Your legacy is what you hand down to those who come after you. In regards to your personal finances, we view it as the positive impact your money can have. That will most likely come in the form of education planning and charitable planning.  

Quick caveat: You should always ensure your own financial fitness and goals are on track before you consider significant education or charitable goalsBoth of these actually fit within your lifestyle projections, but are common larger cash flows that don’t directly benefit you, other than the satisfaction of helping others. 

In either case, charitable or education planning, an advisor can assist in developing goals, determining the cash flow and savings needed, and identifying the most appropriate account types to use.  More importantly, they can make sure it fits into your overall lifestyle to help you live your best life. 

How does it all fit together?  

These three components present the big picture piece of lifestyle design. They are very goal-oriented, but do not include a lot of day-to-day actions or decisions.  From the goals and priorities discussed in our last article, you can work on finding a purposeful work-life balance. With that in place, you should have an eye-opening projection for the lifestyle you want to live. With your priorities accounted for, you can begin focusing on your legacy. In the words of Albert Pike, “What we do for ourselves dies with us. What we do for others and the world remains and is immortal.”  

In our next piece, we will cover more detailed pieces that make the big picture work. These include cash flow management, net worth tracking, and credit/debt management. If you have questions about the components we’ve covered so far or just want to discuss your situation, please contact us.