The “Now and Then” Exercise That Creates Better Financial Decisions

Without clear direction, every financial plan is both right and wrong at the same time.

In this episode, Tim steps away from the spreadsheets and market analysis to explain one of the most important exercises used in real financial planning conversations: defining what a wealthy life actually looks and feels like for you.

The “Now and Then” exercise helps uncover the goals, emotions, frustrations, and life outcomes sitting underneath money decisions. Without clear direction, every financial plan is both right and wrong at the same time.

This episode walks through:

•  Why vague goals lead to weak financial plans 
•  The questions good advisors ask before giving recommendations 
•  How to define what you actually want life to feel like 
•  Turning emotions into measurable goals 
•  Breaking long-term outcomes into realistic yearly milestones 

Whether you’re starting financial planning for the first time, going through a major life transition, or simply feeling unsure about what comes next, this episode gives you a practical framework to think more clearly about your future.

If you have a question, suggestions, or a topic you would like us to cover, please send an email to: podcast@foxplan.nz

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The information shared on The Dollars & Sense Podcast is general in nature and does not consider your individual circumstances. Dollars & Sense exists purely for educational purposes and should not be relied upon to make an investment or financial decision. Tim Ellis (FSP778196) and Brodie Haggerty (FSP778174) are both Financial Advisers providing advice on behalf of FoxPlan Ltd. FoxPlan Ltd (FSP39630) is a licensed Financial Advice Provider. Important information can be found at www.foxplan.nz/disclosure 

Transcript

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If you don't have desired outcomes, if you don't know exactly what it is you want to achieve and by when and by how, if you don't really have a clear direction on what's really important to you, you can't do financial planning. You can try and you can go through the process, but at the end of the day, if that's the position you're in, every financial plan is right, but at the same time, every financial plan is wrong. Welcome back to another episode of the Dollars and Cents Podcast. This week you're just listening to myself, which is Tim Alice, qualified financial advisor working with a firm in Wellington called Fox Plan. Now, the purpose of this podcast is to increase the financial literacy of our listeners. Before I get underway with this week's topic, which is a bit of a change up from other weeks, I just want to remind listeners very clearly everything we discuss on this podcast is for education purposes only. It's not designed to be specific financial advice, and we highly recommend that you seek the relevant professionals before making any major financial decisions. With that out of the way, this week I want to take a step back or a step away, rather, from the technical analysis, from the uh the data from research and from portfolio construction and uh all the geeky stuff to actually take a step back into how we actually do financial planning. You see, some clients perhaps they've been uh referred to us or uh have just really got in touch to find out a wee bit more about what financial planning really looks like and whether it can help them. When they have to answer the questions along the lines of, well, what is it you're trying to achieve? What is it that's important? Why is it important? Sometimes, due to certain circumstances, uh answering those questions is extremely difficult. There's a bit of ambiguity around, you know, what exactly needs to be achieved over the next five years and why is it really important, or uh, you know, what the goals even are. And without having clearly stated or clearly written down objectives or outcomes and goals that are important, extremely difficult to give any kind of recommendations to uh strategies that could be deployed to help achieve those outcomes, or uh, you know, a a roadmap to help get them from where they are now to where they've said they want to be. That can mean that going through the whole financial planning process would be a big use of time, but uh will it really get the outcomes? I'm not convinced. It might instill some new disciplines, it it might inspire some new change, sure. But I think really, really successful financial planning, it needs to begin with the end in mind with clearly stated objectives. If they aren't present before the planning process is really started, there is some tools that we can use to uh help define what those are. I'm gonna share that in this week's episode. Uh perhaps as a useful resource for people to reflect on and perhaps listen to again later in their own space. For listeners that are listening to this driving along in their car, perhaps it'd be difficult to really dive deep into uh some of the exercises we ask people to go through to help define these goals. But it's not only for people that are starting out planning uh for the first time. This often uh arises with clients when major changes have happened in their life. Perhaps that is uh a new relationship has started. And now there's joint uh stated outcomes or joint goals or two different directions uh in some cases that people are looking for as a couple and as a family. It can also occur when a major uh life change has occurred, um, redundancy or or somebody moving away from an industry that they've been in or a location they've been in, and life is somewhat taking a bit of a reset. It's also common for clients that have uh have had young children that are now a little bit older, and life is getting back into a bit more of a routine, and they've got over the hurdle of the first thing on their mind being the young children, and and now they're actually starting to consider well, we've done that, we've done all the other things, what's next? When that happens to be the case, or that's how people are feeling um prior to uh going through the full financial planning process. A useful tool that we can use, or an exercise rather than a tool, I should say, is something called the now and then exercise. I'm gonna talk through what this exercise really looks like and the practical steps along the way that we ask people to go through to get the answers to those questions. Okay, so the first step in this exercise is to write down the word feel. Under that word, we start writing down all the ways that uh that that we're feeling about the different areas of our lives. The most common areas that people tend to focus on when writing down how they feel about their position is uh home. How do they feel about their home? Do they like the location? Do they like the size of the house? Is it underwhelming? Is it too small? Is it um is it not what they wanted? Is it frustrating? Is it always under repairs? Um is the lawn uh not sufficient for the children to play on? Uh what what is it uh how does your home make you feel? How does your family make you feel? Are you able to spend enough time? Are you feeling guilty about not spending enough time? Are you feeling proud? Are you feeling uh uh unaccomplished? Uh how do you feel about your input on your family at the moment? How do you feel about your relationship? Uh is your relationship fair, making you feel exactly how you'd like it to? Or are there areas that you're not so happy with or needs addressing? Uh how are you feeling about your relationship? How are you feeling about your purpose? Is your job really uh providing you enough purpose to be fulfilled uh in your life at the moment? Is your purpose uh not fully consumed by your career or your job? And uh is your purpose more aligned with your family? Uh how do you feel about your current purpose? Uh how do you feel about your finances? Are your finances making you feel uh uneasy, uh worried, uh frustrated, fearful, uh excited? Um what feelings come to mind when you start thinking about your financial position? How do you feel about your career? Are you uh satisfied with your career? Are you unsatisfied? Are you happy? Are you frustrated? Excited? Uh what feelings come to mind when considering how you feel about your career at this stage? There's uh a lot of uh areas people will consider when writing down how they feel. And they'll uh they'll often vary from people to people around what level of priority they give to each area. Um, but it's important that we we get out on paper how you are actually feeling as of today. In the now, how do you feel? After writing down how you feel about all these different areas, now it's time to start writing down why do you think you feel that way? What's making you feel that way? How is that occurring? If we look at uh perhaps questions that were answered around how you feel about your health. Perhaps a client was feeling uh unsatisfied with their health, uh uh feeling uh disappointed or lacking or worried about their health is a common feeling. Well, now we need to start writing down why do you feel that way? Is it perhaps because your your your weight has been gaining? Uh your ability to run is getting shorter and shorter and shorter? Um is it because you you feel like you're not uh being active enough, not going to the gym enough? Uh perhaps your your mental state is taking effect because you're not having time to get to the gym. Um what is it about your health that's the case today that's making you feel the way that you feel? If we're uh focusing on the finances area uh for clients that have expressed feeling uh uh behind, lacking, drowning, or struggling, why is it that you feel that way? Is it because of the amount of savings that you have in the bank? Write down how much savings you have in the bank. Is it because you feel like you're spending more than you're earning? Well, let's get the details on that. Is it uh because you feel like you have no idea where your money is actually going? A very common feeling. Well, uh why don't you know where your money is going? Do we need to address that? Those are strategies. We'll come up with those later. But what's important at this part of the process is to actually write down the facts on what is making you feel the way that you feel now. Now that we've got the how are you feeling now and why are you feeling that way now, out of the way, written down on paper, we now skip right ahead to the end of the exercise and we start writing down how you want to feel then. The time period between now and then varies for different people, depending on what they're thinking about. For a lot of people, they'll use a five-year time period. If five years is too hard for people to think about, they can use a shorter one. But in my experience, a minimum of five years should be considered. Some people uh might have good reason to use a longer time period. It might be 10 years or 13 years. Often that'll be tied to a time in their life that they feel are going to go through a major transition. The biggest one obviously being retirement. They might have a preconceived thought that retirement is going to be 65. If they are aged 52 now, it wouldn't be uncommon for them to write in their how they want to feel then to be 13 years in the future. The time period isn't terribly important for the purpose of this exercise. However, it is important to have a time period. So we can actually put the year that it'll be then. And now we move on to the next step, which is writing down how you want to feel. How would you want to feel about the exact same areas that you started with in the now? How do you want to feel about your home? Not a how does it look, but how do you want to feel? Do you want to uh feel that it is uh cozy, it is loved, it's got memories, it's got um uh a location that makes you at peace at where you live? Do you want it to feel like you can't wait to get home at the end of each day? If we go back and revisit the health, how do you want to feel about your health? Do you want to feel that it's better than it's ever been? Do you want to feel that it is uh it's keeping up with the lifestyle that you want? Do you uh how do you want your health to feel? Your finances? If uh somebody asked you about how you feel about your finances, what would be the best possible answer you could give them? The the most positive answer. Would that look something along the lines of I feel like I have absolute financial comfort, I have freedom to live the life that I want, to make the decisions I want to make? Uh how do you want to feel about your financial position? You you can repeat this process for all those different areas that were important to you. Um, never neglect the family and the relationships. In the long term, those are the things that can have a massive, massive, massive impact on just how happy you are in your life. So my strong suggestion is that you'd always have family and relationships uh in the now and in the then. Once we've now written down how you want to feel about all those different areas that are so crucial to living a wealthy life, now we need to start writing down, okay, well, if that's how you want to feel, what do we need to do in those areas for you to feel that way? If I stick to using the same examples, we're talking about finances. Uh say you want it to feel uh a lot more secure, uh you want to have more freedom, you want to have more options with your finances, and you want it to be more fulfilling or aligned with your life and what's important to you. Well, if that's how you want to feel, what would it take to make you feel that way? We need to start getting super specific on this now and actually starting to write down some goals. If you feel that having a $100,000 reserve fund would actually give you the comfort that you desire, write that in. If we go back to health and you feel in order to feel uh uh achieved or accomplished with your health would be that you're able to run uh well, you would have run five marathons between the now and the then, well, write that in. Write where those marathons are. Uh are you doing the same one five times, or would you like to do the round the bays? Would you like to do perhaps one of the great walks of New Zealand? Uh perhaps you want to do the able Tasman. Perhaps you want to cycle a leg of the Tour de France. Uh whatever is is tied to the outcome of how you want to feel. Start getting specific on what it would take to make you feel that way. If we're going to talk about uh relationships or family and one of the things you wanted to feel is present and uh m more involved, now we're gonna need to start writing down well, what would it take to feel that way? Perhaps it's a matter of time, perhaps it's a matter of activities, perhaps it's a matter of uh of being there for important things that align with children's desires. Perhaps it's simply a matter of a number of days at minimum a week that you're actually able to be present with your children. Now we're getting really specific on the things, the outcomes that need to occur for you to actually feel the way that you want to feel. That'll bring you a life that you feel is wealthy with living. A lot of these goals that you'll write down, depending on how long the time frame between the now and then is, might seem like absolute mountains to climb. They might seem miles away. And if something seems too far away, sometimes it can be a bit too hard to stay focused to that without just breaking it down and making it a bit easier. So the next and last step in this whole uh exercise that we have people go through is, well, let's break that down. Let's say if we used a time difference of five years between the now and then, this year is 2026, I'll draw a line between the now and the then, and the first pegal right in there will be 2027. Now we need to start thinking about what needs to uh change, what needs to be accomplished, or what progress you need to make in the next year to be on track for achieving what you want to achieve by the year 2031. If I stick to using the same examples, perhaps we focus on the health side of things. If by 2031 you wanted to have uh completed five full marathons, right now you're struggling to run more than 10 kilometers together, then maybe by 2027 you'd like to be able to achieve a half marathon. Now let's get specific again. Maybe you could do the half marathon uh around the base in Wellington. Let's get a photo of that and actually put a photo to it. Uh let's look at the route that you'd actually have to take and print out the Google map. Uh let's look at the date, the time. Let's start making a real image of what that'll actually look like and how you will feel when you achieve that. Now I know there's a big difference between doing one half marathon next year and completing five full marathons, but that might be the first step that it takes for you to feel like you're on track with getting to where you want to be with your health. Perhaps you were feeling that you your diet is just you've tried so many different things, but you always revert back to uh a diet that you're not satisfied with. Perhaps uh the one of the strategies is between now and this time next year, you would want to have worked with a dietitian and have a full meal plan and had three months of consistency with that dietitian and that meal plan. Perhaps that's the goal by 2027 to be able to say that's what you've done. That might not be getting you the full outcomes you want in 2031, but that's something that we can now focus on and and work towards between now and in this time in 2027. If we're talking about finances, perhaps the then goal was to have a certain amount sitting in a reserve fund. Um, have a Kiwi Saver or net worth amount or of X amount by 2031. Now, we we can't create that kind of wealth uh in in five years, depending on how big the goal was, but let's start breaking it down. What needs to happen between now and this time in 2027 to be on target for that. Be careful not to use things outside of your control. Uh, if you're using a strategy, and we haven't got to strategies yet, that's where the financial plan comes in. But i i if you try and uh tie a goal of having your KiwiSaver balance up to a certain amount next year, yet it's invested in an aggressive fund, we can't control market volatility. So that could mean that you uh fail your goal due to factors completely outside of your control. Perhaps you only want to focus on things that you can control, maybe the contribution amount that you're putting towards into your investments. Uh perhaps the goal should be more to uh create or free up more surplus in your budget, which will either be increasing your income or decreasing your expenses. And that's what you need to focus to between now and 2027 is creating that surplus somehow and staying consistent with uh deposits making you're making into a managed fund or a wealth-creating facility. Maybe it's debt reduction. Now let's uh look at uh relationships. Perhaps you're feeling like you don't have enough friendships in your life, you don't have enough social activity, you're feeling lonely perhaps if you wanted to feel completely different by 2031. We can't magically make that happen overnight. But what could be done between now and this time, 2027, to be on the track to uh increasing the way that you're feeling, well, uh bettering the way that you're feeling about the friendships that you have, the quality of those friendships, and the the number of those friendships. Maybe that means that by this time next year we need to have signed up for two or three different social groups, trying different things out, meeting new people. See, without going through this exercise, that could be completely missed. Yet by the year 2031, that could be one of the things that you cherish or value the most in your life. Okay, so I'm not gonna go through what needs to happen in every year for the next five years in this podcast episode. The purpose of this episode was to kind of act as a resource, uh perhaps something that you could go and reflect back on later, and maybe you want to complete this exercise for yourself. Once this exercise has been done, that's when financial planning can actually begin. Because by going through this exercise, we should be able to drill down on what's really important and what outcomes actually need to be achieved and by when and who's involved with it, and what what do we really need to do? A lot of the goals or a lot of the things that need to change or occur by the uh the then date require finance. They they require funding, they require a change in habits, uh, a change in attitude towards money, perhaps. And that's where financial planning can actually assist with helping people get the outcomes that they're looking for. Once we've tied what you need to do to why you need to do it, and to what that means for you and how that'll make you feel, that's when financial planning actually becomes a lot more impactful. The value of having an advisor becomes better known and the likelihood of outcomes uh actually being achieved goes through the roof. That's why sometimes doing this exercise before going through the financial planning part is so critical to getting good outcomes and value for money when engaging a financial planner. I hope this has served as a useful resource. Please get in touch if it has. I'd love to hear that it's helped you make some really important decisions in life. That's that's what gives us the energy to keep doing this job. Next week, I'll be back in the studio with Brody Haggerty, getting back to some real geeky stuff that requires a bit of research and numbers, which I'm sure I'll be doing the bulk of. As for this week, that's us.