“We all have one life and one chance to make the most out of it” is the foundational belief that I’ve built my financial advice business upon.

Unfortunately, many in the business of delivering financial advice seem to see your money and your life as important, but competing, objectives that you have to choose between.

A couple of examples …

Most advisors will administer a multiple choice “risk tolerance questionnaire” to determine how much investment risk you think you can stomach. Then, to make matters worse, they’ll typically design your investment portfolio to position you at your stated maximum level of risk based, of course, on your questionnaire.  What if you want to take as little risk as possible? Is that about your money or your life?

I’ve seen and heard many advisors argue that you shouldn’t reduce your debt with investment dollars.  Their argument is that over time, the return on your investments should exceed the cost of your debt and you can get more leverage from your dollars by carrying the debt. (Note: always be wary when the word “leverage” is used). Is this about your money or your life?

What about assumptions used in planning projections? This is dangerous ground, and I’ve seen some really scary numbers and rationalizations used. I’ve seen some advisors use “conservative” projections in their planning work, but they still assume straight-line projections which means they pick an assumption and project that the client will experience this return each and every year into the future. About the only gurantee that I can make in my work with clients is that you will not experience the same return each and every year going forward.  But there are more issues besides the problematic use of straight-line assumptions.  What if because of your “conservative” assumptions, you are working longer than you may need to or saving more than you may need to or both?  And if you’re assumptions are too “aggressive”, things can quickly come crashing down like a house of cards. Again I ask you, are these decisions based on your money or your life?

By now, you may wonder if there is an alternative, and I’m happy to say that there is.

Imagine all financial decisions being driven by what’s most important to you and your family. Imagine an approach to financial advice that focuses on making the most of your one life. How would this approach address the scenarios above?

Instead of a multiple choice risk tolerance questionnaire, I would encourage you to think of risk from 2 perspectives: and Ideal and an Acceptable.  Ideally, what is the minimum level of risk you would like to experience. And, if the situation called for is, what is an Acceptable level of risk you’d be willing to tolerate if it meant the difference in reaching your goals.

What about debt reduction or elimination? Again, think in terms of Ideal vs Acceptable. Maybe it would be Ideal for you to have no debt and you want to include a plan of action to eliminate your debt in your overall strategy. But then again, if the situation called for it, maybe it would be Acceptable to you to continue to carry a 1st mortgage on your home for the time being.

Assumptions? This is where we can embrace the uncertainty of the markets and “stress test” our plan and it’s assumptions through the use of probability testing, or what is often referred to as a Monte Carlo calculation.  This isn’t a perfect science, but it is a much better solution than the use of simple, straight-line return assumptions.

This article isn’t designed to help you solve your most pressing financial needs. Instead, I hope you’ll begin to understand that financial decisions and financial advice are all about balancing trade-offs based on what’s most important to you.

And I believe that the balance between your money and your life is one of the most important aspects of professional financial advice.  You need to strike a healthy and comfortable balance between enjoying the fruits of your labor today while still having rational confidence that you’re prepared for the uncertainties that inevitably lie ahead in each of our lives.

It’s not a question of your money OR your life.

It’s a pursuit of your money AND your life.