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MsoChpDefault { font-family: Cambria; }div.WordSection1 { }ol { margin-bottom: 0in; }ul { margin-bottom: 0in; }Running heads:Verso: Retirement FailRecto: Underliving Your WealthChapter 9Underliving Your WealthOne Sunday, years ago now, I was visiting my parents for dinner. My mom and dad loved to travel, and they had recently returned from a four-week luxury tour of Europe. As they were telling me about their trip through the great capitals of the continent, my mom set a salad bowl on the table and explained that there were no tomatoes in the salad because tomatoes were too expensive at the store.I love to share that story because it illustrates perfectly people’s idiosyncrasies about money. My parents had just taken a very expensive vacation, which they enjoyed tremendously, but a high-priced tomato was just too extravagant. It’s not that they couldn’t afford it, they just weren’t willing to spend on something they thought wasn’t worth the price.

We all place different value on things, and we are constantly making judgments about what we consider a fair exchange for various items and experiences. A lifelong city dweller might not have given a second thought to buying tomatoes at the price my mother refused. But Mom had grown up on a farm, and to her, $4 per pound for tomatoes (or whatever the price was that day) was just too much.I find myself doing the same thing.

I often skip lunch because I’m running too hard during the day, so my wife, Pam, has recently begun making lunch for me to take to work. At the end of the day I come home with the paper bag and she asks what I’m doing bringing home a used paper bag. I say, “It’s perfectly fine, I can use it again tomorrow.” I’ll spend freely on a nice dinner out, but a deeply ingrained sense that I should reuse what I can means that I take the trouble to fold up my paper lunch bag and stick it in my briefcase for a second use.

In the scheme of things, will the few pennies I save on lunch bags make any appreciable difference to my savings? Nope. But that type of small economy is a quirk I have, left over from my upbringing. I tell Pam, “That’s the Pittsburgh in me.” We grew up with hand-me-downs and threw nothing away if it still had a thread of future use.

That was a family value, and it’s one I still have.Every single person I’ve ever met has a few eccentricities in the way he or she handles money. And that’s okay. In fact, it’s healthy to stop and think about your purchases, and to consider whether what you’re buying is (a) truly something you want or need and (b) worth what you’re spending on it. But it’s also important to balance your quirky frugalities with a realistic sense of what you can spend and to enjoy what you’ve worked so hard for.Amazingly, underliving their wealth is a big reason many people fail at retirement. We’ve focused up to this point on the traps that can jeopardize your financial independence, but you can also stunt your retirement by being afraid to appreciate the fruits of your labor. After all, retirement is not just the end of one phase of your life – a phase in which you built a career, likely raised a family, and contributed to your community – it’s the beginning of a new phase – one in which you can explore areas you were too busy to investigate before.

But, for a variety of reasons, people sometimes fail to live fully in their retirement years and enjoy what they have built.Your Money PersonalityThe way you think about and handle your money is based on a complicated mix of your personality and your upbringing – on the way your parents and other family thought about money and whether there was a lot or a little in your household, as well as the economic context of the time and place where you grew up.While there are many variations and ways to categorize different money personalities, the personality types generally fall into three main categories: spenders, avoiders, and savers. Spenders get pleasure from buying items and services for themselves and others, and they may have a difficult time holding onto cash; avoiders dislike thinking about money, either because they feel overwhelmed and intimidated or because they have a sense that money can be corrupting (“the root of all evil”); savers feel more secure when they have a sizable amount of money at their disposal, and some may tend toward hoarding their wealth. There is, of course, a wide range of behaviors within each category, and those at the extremes may have disordered thinking about their finances.We talked about spending in Chapter 1, focusing chiefly on problem spending. But saving or conserving at the extreme can be an issue, too, particularly if you are financially comfortable but consider spending on vacations, entertainment, and even the occasional luxury to be risky or ill-advised.

type=”Box”According to a 2015 survey, 15% of affluent investors regret not enjoying their money more.1Living with FearFear is probably the biggest reason people underlive their wealth. They think, “Something bad could happen, so I have to constantly protect what I have.

” They fear that they could run out of money – that the markets could take a dive, the value of their property could tank, or they’ll run through their savings too quickly.This anxiety runs through even some very wealthy clients, whose portfolios are robust enough that they could sustain themselves through nearly any downturn. These folks could easily afford to travel or to indulge their interests in whatever ways they choose. But old habits die hard, and irrational fear of the future may take hold; sometimes people in retirement remain in full-on save and conserve mode even when there is no rational reason to do so.In physical terms, the inclination to hoard money is not unlike the mentality of doomsday preppers who store up seven years’ worth of food and water in the event that society breaks down. While it’s wise to be prepared for emergencies, don’t let yourself be so busy worrying about things that will probably never happen that you forget to live.When we encounter clients who think they are at great risk and so cling unnecessarily to their cash, we try to help them manage their fear.

To help dispel the worry we look at the overall picture, both at history – at the performance of the markets over time – and at the clients’ individual portfolio levels and allocations, to assure them that they are invested in a way that properly manages their risk.While no one can guarantee smooth times ahead, we can make projections and weigh the likelihood of various scenarios coming to pass, which tends to calm jitters enough that people can go ahead and live as they wish. If cautious spending is their true preference, that is fine, but if our clients aren’t enjoying themselves because they are afraid they can’t afford it, a candid picture of their finances can often set them at ease and help them take pleasure in what they’ve worked so hard to earn.

When Money Personalities CollideIt’s common for couples to argue over money and how to spend it. If one person falls into one category of money personality and the other falls into a different category – or even if the two are in the same category but at opposite ends of the spectrum – conflicts may arise. The way you handle money is, after all, very personal, and it’s easy to feel attacked when your partner questions your decisions to save or spend.

Quite often, fear regarding spending manifests mainly in one spouse or partner. It’s not unusual for one partner in the couple to really believe that they are in danger of outliving their wealth and to live off that fear. That partner has a habitual pattern of thinking about money that goes like this: “Everything that can go wrong will go wrong, so we’d better not spend any money we don’t have to.

“type=”Box”A 2015 Fidelity study found that more than oneSL1  third of couples disagree on the amount of their household’s total investible assets (36%).2I have a client couple who fits this profile. The husband is fearful that another recession or even a depression is coming and that they will be all but wiped out, but the wife wants to get out and explore the world now that they have the time. They worked really hard at their careers their whole lives, they are very well situated financially, and it’s really only the husband’s apprehension that is holding them back.

When I spoke with this couple at a recent meeting, I told them, “You are spending $10,000 a month and can probably spend twice that amount without risking your future at all. What would you like to do?” I listed a few ways they might enjoy their money, and the wife’s eyes sparked when I mentioned a trip to Australia. But her husband was hesitant, feeling that was an expensive trip that they didn’t need to take right then.

In some instances, the fear is about leaving the other spouse alone and without adequate financial resources. My dad passed away early, leaving behind my mom, who was four years younger. His concern had always been that she would give everything away to the kids and then be broke. I manage her money for her, and she would occasionally remind me: “Dad always worried that I wouldn’t have enough. Do I have to be careful?” My dad’s warnings have stayed with her through the years. She grew up on a farm during the Depression years and remembers how lean times can get.Here’s the thing.

At some point, it will likely be too late to truly enjoy many of the things you can do with your money. As you grow older, you may find it more difficult to travel comfortably. Even if you are relatively healthy and can physically make the trip, changes to your mind and body as you age may mean that you feel less enthusiastic about it. Possibly, you will be less able to get to the sites you want to see or to spend hours walking the streets of foreign cities.

It will get more difficult to try new adventures. Do the things you want to do while you are young and healthy enough to enjoy them.Planning for your financial future is critical, but if you and your advisor have reviewed your portfolio and you are within the limits of appropriate spending, get out and enjoy your wealth. Shortly after my meeting with the reluctant couple I just mentioned, I spoke with the husband, who told me they’d booked a three-week trip to Australia and New Zealand and he felt good about it.

GiftingEnsuring that money is left as an inheritance for their children is a concern for some people, and we have clients who cite this as the reason they hold tight to the purse strings. While leaving a financial legacy is an important consideration, it’s helpful to balance this desire with the need to enjoy family time while you are around to take pleasure in it.We have a few frugal clients who are not particularly interested in travel or in buying art or real estate or other things that might bring them pleasure. Instead, their joy comes from family. When this is the case, we will ask, “Okay, when it comes to family, what’s important to you?” We like to show them what their abilities are, suggesting possibilities like a family gathering that would help them make lasting memories with their children and grandchildren.My parents went down this path, and one year they rented a couple of beach houses for a few weeks. They invited all of their kids and grandchildren to join them, and they covered the expenses.

That was hard for any of us to turn down, especially early in our careers when we didn’t have a lot. The vacation was a huge success. Extended family came down to stay when they could, and my parents took great satisfaction in seeing the whole clan having a good time together.

They repeated this most years, always coming up with a new place and a new adventure.These sorts of experiential gifts are a good way to spend in accordance with your values and share your time and wealth with those you love. People are sometimes afraid to do this until we start walking them through it, but then they get excited by the prospect.We do have a few clients who have wondered whether they should just conserve everything and will their children the entirety instead of spending in this way. I say, “You are spending their inheritance on having special times with them.

You’re not going to get through it all.” A common worry is: But maybe they don’t want to spend it that way. To which I reply, “What do you want?”I’ve seen some situations where the kids have inherited a great deal of money and they don’t even feel good about it because their parents didn’t enjoy it. The kids felt guilty. You do your children a favor by showing them how to enjoy life and not make an obsession out of saving every dollar.Once my dad had passed away and my mom had reached her 80s, she began looking for a new way to show her love to her children and grandchildren. She is pretty conservative in her spending and has room in her budget to spend much more than she does.

Her needs at this point are fairly simple, and she has a nice income and a portfolio that easily meets her cash needs. So what should she do with her money, especially now that her travel is limited?After some discussion, we came up with the idea of “I love you” gifts for her grandchildren and great-grandchildren. Every now and then, she sends each a note with a check inside. She’ll say to me, “How are my investments doing? I want to send my grandchildren some money to help them out.”The “I love you” gifts come out of the blue, which makes them a special surprise. I suggest keeping the gifts completely random – vary the amount, and don’t tie them to a major holiday or to birthdays. The grandchildren are in their 20s and 30s now, and the gift means a lot to them. It takes a small financial burden off of them and lets them dream a little.

And for my mom, it’s a fun way to feel uplifted and give her grandchildren an unexpected treat.So Enjoy …Retirement is an opportunity to try new things, unencumbered by the demands of work and daily care for children. If you have enough wealth to be comfortable financially and to explore new places and activities, go and do it. As long as your spending is not jeopardizing your lifestyle and risking your becoming an eventual burden to your children, you should enjoy what you’ve worked so hard to achieve.If you’re not sure that your spending levels are appropriate to your retirement savings, consult a financial advisor who can analyze your portfolio and your needs and offer some recommendations. There is a possibility that you don’t need to be quite as conservative as you think and that you can afford to take that trip or arrange an extended-family getaway.Staying engaged in life is a critical part of a happy retirement, and it’s important to remember that your money is a tool rather than an end in itself. So don’t fail at retirement by underliving your wealth – this new chapter of your life gives you a chance to make the most of what you have and to share your good fortune with those you love.

type=”SummaryBox”Tips for Living Fully in Retirement·      Live within your means, but understand what that entails. If you have worked hard so that you can enjoy retirement and have a nest egg that will provide well for you, go ahead and explore the activities you would enjoy. Don’t let fear limit your possibilities.·      Talk with your financial advisor about what you can safely withdraw for your spending and about a gifting strategy, if that is something you would like to do. Having a clear financial plan can bring peace of mind if you are anxious about outliving your money.·      Discuss your goals, both lifestyle and financial, with your spouse or partner, if you have one, to help resolve any differences in your money personality.·      Consider spending on experiences, especially those you can share with family.

Research shows that people derive more happiness from spending on trips, entertainment, and special dinners out than on material items like TVs or cars.3·      Likewise, studies show that spending on others contributes to our own happiness, so give those gifts and share your wealth. Just be sure not to create an expectation of a gift, and vary the amounts you give each time. Remember, this is a gift, not an entitlement.Chapter 91.

         Wells Fargo press release, “Wells Fargo Survey: Affluent Investors Feeling Good on Financial Health; Yet More Than Half Worry About Losing Money in the Market,” July 15, 2015. Accessed August 18, 2017. https://newsroom.wf.

com/press-release/community-banking-and-small-business/wells-fargo-survey-affluent-investors-feeling.2.         Money Habitudes, “Financial Statistics.

” Accessed September 22, 2017. http://www.moneyhabitudes.com/financial-statistics/.3.         Paulina Pchelin and Ryan T.

Howell, “The Hidden Cost of Value-Seeking: People Do Not Accurately Forecast the Economic Benefits of Experiential Purchases,” The Journal of Positive Psychology 9, No. 4 (March 2014). Accessed September 2, 2017. http://dx.doi.org/10.

1080/17439760.2014.898316. SL1Prod ed: double check style of fraction (hyphen or not), as per query earlier in book


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