How do you coach happiness with money? by Kim Stephenson (guest)
If you use strengths, values, positive psychology and so on in your coaching, you’re already in a good position. Money might be a useful tool for the client– then again, it might be irrelevant.
For example, what would you do if you won several million. Decide that you’d “do a Viv” and “spend, spend, spend”. Remind me, how did that end up, bankruptcy, divorce, depression wasn’t it? Or would you work out what you wanted, and if you actually wanted nothing, give the money to those who did? Would you be happier with that – well, these people did it, and they were really happy.
It only takes the realisation that money is just a tool, not a God, to get people thinking about life rather than money – just the sort of re-focus that good coaches help with.
Let’s take a concrete example of what I mean – Pensions.
Imagine you’re coaching somebody about “pensions”. Maybe you think “what about all the rules, funds, tax laws, options. Should they have a policy, take the proceeds straight away, invest more? How do you advise them on a pension?”
Clients ask because they have heard from guru’s (self-appointed experts who can’t spell charlatan) that “everybody should have a pension”. But they’re bewildered/bored by details of tax, carry forward, investment options, policies. I used to do all that professionally*, but I don’t know the rules now (they change with every election, budget, financial statement or scandal) but I don’t care, because people don’t actually want a pension.
They want security, or freedom, or a lifestyle when they have time to do the things they don’t have time for when they’re at work.
Some people want to retire from the job they hate because they went into something they didn’t like because it paid well, ignoring the life they wanted. Maybe they want something to keep them until they are earning enough in something they like. Some want an income that’s secure, that will top up part-time work; they love what they do and spent years learning to excel, why would they ever retire completely?
They each have a vision of what their future could be like. For some, a conventional pension product might be useful. For many, tying the money up would be daft. A pension plan is just a way to put money aside. It’s got tax advantages, but it has downsides too, like less flexibility.
So all the questions about “what fund”, “how do you maximise tax relief” and so on are the wrong questions. Here are some more useful questions, many of which you may use in your coaching already:
What does a pension mean to you? Income, savings vehicle, security blanket, lifestyle choice, aspect of your compensation? Depending on what you see it as being, you may want different things from it and ask different subsidiary questions, that have different answers.
What do you actually want from life? If you’re, say 30 now and plan to set up your own business in a year or two, does it make sense to tie up money in a scheme where you can’t get at it for 20 years? If you plan to travel round the world when you retire and do the stuff you didn’t have time for when you worked full time, do you think it’s a good plan to leave that to chance? Might it be better to see if you can live now on say, 70% of the money you have (that you don’t have time to spend) so that you can put 30% away and build up funds for when you need them?
See what I mean?
You can’t decide on what to do until you know your goal, and you can’t sort out your goal unless you know what you actually want. And the answer to questions like “should I put more into pension” are simple when you know what you’re trying to do. It’s not rocket science to keep money in hand for a lifetime ambition, nor to work out that if you can’t live on 70% of your money now and put 30% away, you’ll have trouble in retirement with no savings and 100% of no regular income at all.
What you can do is look at client values (positive psychology coaching), their happiness and fulfillment (flow, happiness), their goals (goal setting). They’re all things you may do now and there’s no technical finance expertise needed until those things are nailed down.
That’s because it’s the person that matters. The money is only a tool. Financial advice tends to focus on the tool, but once you have a hammer, everything starts to look like a nail.
What people actually want is to build a life, and what sort of building can you do when your only tool is a hammer?
What life do they want, would they like to be happy, fulfilled, feel they’re working towards something that has real meaning for them? That’s what the Dalai Lama thinks, and what surprises him about money. It’s what features in Seligman’s work on happiness, that relationships, spending on others, values, activities that engage us, having a meaning to life, are important. That beyond having basics like shelter and food, money makes little or no contribution to happiness. And we know that materialism is linked to being unhappy.
So how can this work in reality?
Remember Financial advisors tell people “money is important”, with the corollary “maximise your money”. If the client needs specific financial products, fine. When they can go to an advisor and say, “I want to do X, I need Y in Z years” – it makes the advisors job easier, takes less time and that cuts the fees!
The aim: Help the client have more tools to realise what they want to build!
The mindset: You’re more important than the money, so start with you, define “best” in terms of you, not in terms of the money.
An approach: With a client who insists they don’t really know what they want, but figures life would be much better if they had lots of money, I typically say:
Imagine you’re 10 or 15 years older, have become famous and are being interviewed on a TV program by your favourite interviewer. What do you tell them about you, the achievements you are proudest of, memories you recall the most fondly? What is it that you’ve become famous for?
Clients sometimes have trouble with this, giving themselves permission to dream, to think about the person they want to be, what matters to them. But with help, they realise what they want their life to look like. Usually it’s things like being respected in their job, being a great parent, founding a charity – it rarely involves money and if it does, it’s usually to have money to give to other people! That’s the important stuff, the money doesn’t really matter except as a tool to achieve something worthwhile.
So why worry about the money – the person and their life are the important bit? Once the person has a clear idea of what they want to build with their life, they can think about the tools to build it, which might or might not involve money.
And if it involves money, fine, how much? How can you set a goal that you can’t see? But often the financial idea is “maximise your return”. OK, but at what risk? Tell me, would you pass up the life you really want, that you can get with the money in a bank, because betting on a horse-race might give you a better return? Until you know what you want, and what money you need to do it, you can’t decide what to do with the money you have now, what risks are worth taking.
Finally do you coach clients on that sort of personal finance?
If so, I’d love to hear from you maybe we can share ideas. If not: Why not?
Kim is a former financial advisor and an Associate of the Chartered Insurance Institute (hence the interest in costs, ROI etc.) and now a Chartered Psychologist, coach and tutor/assessor in neuroscience. He’s written two books on the psychology of personal finance and can be contacted on kim@stephenson-consulting.co.uk or via the website, www.tamingthepound.com.
* I’m qualified in finance and worked as a financial advisor for 14 years, have taught personal finance and am a qualified and experienced psychologist and coach. I do know a bit about both people and money. From that (unique) viewpoint, those ideas are wrong. They assume people are simple, while money is complex and money is more important than people. Neither assumption is even partially true.
