I recently returned from an eye-opening family trip to Spain. I met my wife in Madrid more than two decades ago when we were both studying abroad, and while the city might be more modern, the rituals and culture remain remarkably unchanged. I have returned often over the years, but on this trip I was particularly struck by the amazing difference in perspectives on life and how the Spanish live it.
We arrived in Madrid on a lovely Saturday afternoon. Driving to the hotel, my daughters noticed most of the storefronts were closed. They were surprised that most stores close between 2 and 5 p.m. so people can have lunch and recharge, rather than staying open and making money.
After unpacking we sat at a street café, enjoyed a snack and watched the city slowly come to life as couples, families and friends emerged to the streets for their evening paseo; the daily ritual of catching up by taking a stroll, having some snacks and perhaps doing a little shopping.
The routine makes little sense amid the bustle of our modern world but it is nonetheless an interesting lens from which to view how we help clients live their best lives.
Besides money, time is the other major limited resource in life that everyone wants more of. Yet very few of us approach managing this aspect of our lives using the same discipline with which we manage our money.
We financial advisers take great pride in helping clients allocate their investments as efficiently as possible, but imagine if we helped people think about how their money can get them to use their time more prudently.
There's scientific evidence that using money to give people more time can make them happier too. In August 2017, researchers at Harvard published a paper after studying the spending habits of more than 6,000 people in the US, Canada, Denmark and the Netherlands.
They found that: "Despite rising incomes, people around the world are feeling increasingly pressed for time, undermining well-being. We show that the time famine of modern life can be reduced by using money to buy time. Surveys of large, diverse samples from four countries reveal that spending money on time-saving services is linked to greater life satisfaction. To establish causality, we show that working adults report greater happiness after spending money on a time-saving purchase than on a material purchase. This research reveals a previously unexamined route from wealth to well-being: spending money to buy free time."
None of us dispute that one of the cornerstones to living richly is spending our limited time on the things we really care about. However, most of our discussions with clients focus on the wrong goals. So what can we do about it?
1. Helping people prudently spend is as valuable as helping them prudently save.Of course we advisers are rightly focused on ensuring that people don't run out of money. However, there is usually a trade-off between time and money. Focusing too much on building the biggest nest egg possible sets the wrong goal for clients. Every dollar saved might build more security, but it just as surely takes away from their life today. More money does nothing to improve your life if you don't use it to improve your life along the way. Preventing clients from over-sacrificing today is as much a part of a great planner's job as ensuring a financial plan works in the future.
2. Priorities exist today that are as important as those in the future. Planners spend most of their time with working clients discussing their future retirement, but working folks worry the most about prioritizing all of the trade-offs they have today. They want to be there for their families, find time and money for vacations, or even carve out time in their schedules to work out. Advisers can help people make decisions right now to improve their lives immediately, but because most discussions with advisers are about sacrificing as much as possible for the future, they lose the opportunity to make trade-offs and add immediate value to people's lives today.
3. Discussing what really matters engages everybody. The biggest cost of our industry spending so much time on math and money is that it disengages the nonfinancial person. And if we work with couples, that usually means one of the spouses is not involved in something that they should be making an integral part of their financial lives. By talking about time and how the money will support each person's priorities, you connect to the universal truths we all care about.
Money might not grow on trees, but time doesn't grow at all. One of the consequences of having a country that encourages two-hour lunches and siestas is that Spain is one of the least financially successful economies in Europe. Yet you can't help but notice their focus on living and enjoying their time, instead of working and making more money, has a meaningful impact on the quality of their lives.
For each of us and our clients, the balance lies somewhere in between. Our job is to help our clients live at their ideal place on that spectrum of trade-offs.