This is perhaps the most powerful and underutilized question when it comes to handling our finances.
Usually, we get tied up in the questions starting with “what, how, where, and when.”
“What should I do with my 401k investments?”
“How do I pay less taxes?”
“Where do I put my safe money?”
“When can I retire?”
The questions are important. There is no doubt that they need to be answered well.
However, we often neglect to take a step back and view our lives from a larger perspective.
Before digging into the details of your retirement timeline, it is good to ask yourself why you want to retire. What is the driving force behind your decision? Why do you want to stop working at 65 instead of 60 or 70?
Typically, the answers to the queries are more illuminating than we realize.
You may, for instance, realize your goal to retire at 65 has been linked to when you always thought you would draw Social Security. If you find out, though, that a different age makes more sense to begin your benefits, you may see that your target age actually changes and is now linked to a different, better goal.
This becomes even more integral when other people are involved and affected by your decision.
Take, for example, a married couple. The husband has always wanted to retire at 62. Maybe the couple hasn’t discussed the reason behind this goal, and when they do the husband specifies it’s because he wants to spend the entire summers traveling.
When the wife finds this out, she tells him she doesn’t have interest in that much summer travel until their grandkids finish high school sports because she wants to be present to cheer them on.
It is much better to find this out on the front-end before the final decisions are made than to discover it after plans have already been set in motion.
Another example could be a young professional who is determined to pay off their student debt as soon as possible.
Their answer to “why?” maybe that their parents have always told them it is bad to carry debt and have shamed them for taking on the loans.
In this case, the answer to a person's problems may not be paying off the debt so quickly. After all, what if this depletes their cash on hand and forces them to go into more debt down the road with less favorable terms when they buy a house or have an emergency.
The point is, we all need help at times detaching from the details and taking a look at our situation from a broader lens.
Asking ourselves “why?” is often a good place to start.