The key question a financial planner asks

Money plays many roles in our lives; it can enable freedom, security, or joy. But it can also cause stress and uncertainty. At the centre of many financial decisions lies a deceptively simple question that, according to financial planner and author CARL RICHARDS, each of us must answer for ourselves: “What is enough?”

Some people save too little, while others sacrifice too much for the future. Either way, there’s no external benchmark. No spreadsheet or adviser can definitively tell you whether you should enjoy a weekend away now or keep saving for retirement.

In this short video, you’ll hear practical insights on prioritising your values and using your money to support them — both today and years into the future.

Key takeaways

No one can tell you how much is “enough” — it’s up to you to define it.

Spending on experiences tends to bring more lasting happiness than buying things.

The pleasure we get from material purchases fades quickly — consider long-term fulfilment.

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Transcript

Robin Powell: Financial planner and writer Carl Richards has spent his career helping people find the right balance between saving and investing on one hand, and spending on the other. Of course, that balance will be different for everyone, but there is, he says, a fundamental question we all need to ask ourselves.

Carl Richards: Whether it's not saving enough or saving too much. Like they're both challenges. Most of them come down to one simple concept. And that is defining what enough is, right? Getting comfortable with your enough. And that's part of the problem here, there's nobody who can tell you the answer, right? There's nobody can tell you the answer. Should you spend on this weekend trip with the family? Or should you save that because you might need it 30 years from now?

RP: These are all issues that a good financial planner can help you with. But ultimately you need to decide for yourself where your priorities lie.

CR: So you do the spreadsheet. Important. Incredibly important. And then you kind of tear it up and you do your sun salutations or your yoga, or you go on your morning walk. Whatever you do, they get quiet and say, which one's more valuable to me because you're the only one that will know that answer. And I think that will get you closer to enough. Sometimes you'll say, you know what? That experience isn't as important as making sure we have money 20 years from now. And sometimes you'll say, right now, our family really needs this. And both of those times you'll be right.

RP: A rule that Carl Richards applies in his own life is to prioritise spending on experiences, as opposed to physical possessions. It’s advice that’s supported by academic evidence.

CR: The research is pretty clear. Experiences bring more happiness than stuff, right? And that those experiences include experiences today. And they include experiences 20 years from now and some of those experiences far off 20 years from now. You have a hard time even imagining, because the research is also clear when we think about ourselves 20 years in the future, we have the same emotional connection as we do a stranger.

RP: Something else to bear in mind when you’re tempted to buy a new car or the latest smartphone is what behavioural scientists called the hedonic treadmill. Simply put, the thrill we experience from buying things soon wears off.

CR: The point is, at a certain level, and this is true with ice cream. It's true with chocolate chip cookies. It's true with running. It's true with everything. At a certain level, there is decreasing marginal utility. Right. The added benefit for one more bite of ice cream when you go from bite one, that's the best. Bite two is really awesome.

You get to bite 47 and it's actually getting worse. Right? And it's the same thing with income. Like unless we're really clear about how we're using it, it's just earning more is not going to make you any happier.

RP: Again, only you can decide what you want to spend your money on. And if you’ve not done this already, there’s no time like the present to figure out what your values and priorities in life really are.