George Children
Children's Institute
George Kinder wants all people to be free.
At first glance, the concept of personal fulfillment or enlightenment seems to fit more into the realm of religion or spirituality than the realm of personal finance.
But Kinder, who is considered the father of the “life planning” branch of financial advice, has been preaching the connection between finances and freedom for decades.
In fact, his new book, The Three Domains of Freedom, is a treatise on this subject.
“There are types of goals that provide deep inspiration to clients,” Kinder, who founded the Kinder Institute of Life Planning in 2003 after 30 years as a financial planner and tax advisor, said in an interview.
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He is probably best known for his “three questions” designed to help people identify the core of their life goals.
“If you identify these and really paint a picture of what [someone’s] Life would be as if they actually had that life. The customers are on fire and they solve their financial problems pretty quickly and pretty easily,” Kinder said.
CNBC spoke with Kinder about life planning and why he thinks many people miss the point when it comes to managing their money. This interview has been edited and condensed for clarity.
“You should focus on your dream of freedom”
Greg Iacurci: What is the basic premise of the life planning movement?
George Children: The basic assumption is that financial planning is about giving a client freedom. Every person dreams of freedom and should live that dream. And that applies to people who have no money, to people who are in debt, as well as to people who have a lot of money.
The focus shifts from money – where we have many worries and many tasks to do – to freedom. What does it actually look like, what does it feel like and what steps are necessary to get there?
GI: What do you mean by freedom?
GC: I think each of us has our own feeling for this, and the way to get there is through the three questions.
When people focus only on money, they lose sight of who they really want to be and what they want to do. And often they assume, “Maybe I can't do this until I retire, or maybe I'll never be able to do it. So I don't really want to deal with that. I'm just going to try to be more efficient, [my] Money.”
The premise of life planning is, no, you should focus on your dream of freedom and do some of these exercises to figure out what that is. And then you'll find that the financial side goes a lot more smoothly because it doesn't feel like a chore.
“People get lost in everyday stuff”
GI: Do you think people blindly save money or try to accumulate wealth without really thinking about what it is good for?
GC: Everyone I have met does this. It is widespread throughout civilization. People get lost in the daily grind and have no structure. Without really having this dream of freedom, [financial] Tasks are difficult to follow.
GI: The three questions help to identify what is most important to people and what they want to do with their lives. They get them thinking about how they could use their money to achieve those goals.
GC: Exactly. It takes your eye to the goal. People don't really know what they're aiming for. I think they end up aiming for things they read in financial magazines or the Wall Street Journal or personal finance blogs. They think they just need to get their IRA in order and do more budgeting. They get lost in that instead of always keeping in mind, “OK, there's a reason for this, and the reason is that I want to live this life, and if I do these things, [then] I can get there in a relatively short period of time.”
George Children
Children's Institute
GI: But that doesn't necessarily mean that the way people save is wrong, does it? You hear these rules of thumb that you should save at least 15% of your income for retirement. You just want to ask why you do that?
GC: That's not wrong. And if you read good advice or have read books or have an advisor, you also know pretty well how to save, invest and all that. So it's not wrong. But the focus is wrong, so you're lost.
You said, “Save 15% for retirement.” Why do we use the term “retirement”? I would say that “freedom” is a much, much more powerful and appropriate term for any person. And freedom can happen in one year, it can happen in six years. It doesn't necessarily have to coincide with what we normally think of as retirement.
GI: Basically, don’t postpone your goals and ambitions until after you retire.
GC: Exactly. When we look at these things, we think about how we can achieve this in a very, very short period of time. By “very short period of time,” I usually mean sometimes within months, almost always within three years, and usually within about a year and a half.
You may not get exactly what you want, but you are really on the way there and it gives you a great sense of freedom.
For example, if you dream of living in the country but you live in the city, you might take a two-week vacation to the country every now and then. [but now] maybe you're working four weeks or six weeks. Maybe you're working more from home. Maybe you're already looking at where you want to stay and thinking about how you can spend three months there in a year or two. So you're actively moving toward freedom as part of the program of financial planning, your financial life.
“We only experience freedom in the present moment”
GI: Do you think that's something that's achievable for everyone, or do you think that's more of a luxury that wealthy people are better suited to? Maybe they can achieve that freedom more easily financially.
GC: If we formulate it in terms of financial freedom, then of course the people who have greater resources are more likely to be able to achieve it.
But I grew up in a very poor part of the country. I was born in West Virginia and lived across the border in rural Ohio. I think when you grow up around people who are not wealthy, you realize that every single one of them has a dream of freedom. Every single one of them wants to live a life that is extraordinary to them.
So I would say it's absolutely possible for anyone. And the main reason is that when you achieve your dream of freedom, if you do it well, you get extremely energized. You get energized when you achieve it. So it's not so much about money, it's about developing a passion for who you really want to be.
GI: How does your new book contribute to your work on life planning?
GC: The heart of the book is the inspiration and tips for implementing your own life plan so that you can live [it]. The second subtitle of The Three Domains of Freedom is “Your Life Belongs to You.” This part of the book is geared towards inspiring the consumer to do it themselves, and if they can't do it themselves, then to find a trustee who will combine these things and help them do it.
There are two other elements. They may seem far-fetched, but they are not.
Why do we use the term “retirement”? I would argue that the term “freedom” is a much, much more powerful and appropriate term for every human being.
George Children
Founder of the Kinder Institute of Life Planning
We only experience freedom in the present moment. It's the only moment we ever experience. I devote a third of the book to how to master the present moment itself, and mindfulness plays a big part in that. In terms of personal finance, it helps because the less you are twisted and torn in the present moment, the less you are fighting or neurotic in any way, the more peace you have and the easier it is to make decisions.
And then the last third [of the book] takes the term “fiduciary” and applies it. What if, in addition to financial advisors being fiduciaries, every institution, every corporation, every nonprofit, every government was a fiduciary of truth, of democracy, of the planet, of humanity? What I'm saying is that we should require them to be fiduciaries who put their own interests first. And if we did that, I think that would be an end to the madness we're in.