I think what many people really want from money is the ability to stop thinking about money. Having 'enough' money means they can stop thinking about it and focus on living life. But what is ‘enough?’ Money is complicated. Everyone is different, which is part of what makes this topic fascinating. There are no black-and-white rules.
Having worked with affluent Canadians for a decade I can say there a few things that jump out when it comes to the art of spending money. I recently read this exchange with Former General Electric CEO Jack Welch: Jack once nearly died of a heart attack. Years later he was asked what went through his mind while he was being rushed to the hospital in what could have been his last moments alive. “Damn it, I didn’t spend enough money,” was Welch’s response. The interviewer, Stuart Varney, was puzzled, and asked why in the world that would go through his mind. “We all are products of our background,” Welch said. “I didn’t have two nickels to rub together [when I was young], so I’m relatively cheap. I always bought cheap wine.” After the heart attack Welch said he “swore to God I’d never buy a bottle of wine for less than a hundred dollars. That was absolutely one of the takeaways from that experience.” “Is that it?” Varney asks, stunned. “That’s about it,” says Welch. How you spend money can reveal an existential struggle of what you find valuable in life, who you want to spend time with, why you chose your career, and the kind of attention you want from other people. There is a science to saving and spending money – how to find a bargain, how to make a budget, etc. If you develop an early system of savings and living well below your means – congratulations, you’ve won the science portion. But there’s also an art to spending. A part that can’t be quantified and varies person to person. If you can never break away from the science and insist on a heavy savings regimen well into your retirement years, is that still winning? In my practice as a CERTIFIED FINANCIAL PLANNER® (CFP), one of the challenges I experience is actually getting clients to spend money in retirement. Even an appropriate, conservative amount of money. Keep in mind, this is after they have a well-constructed financial plan that, for all intents and purposes, protects them from running out of money. Frugality and savings can become such a big part of some people’s identity that they can’t ever switch gears. So let's revisit what your attitude about spending money says about you. If part of your identity is based on being an excellent saver, you may value security and are comforted by the knowledge that your portfolio keeps you safe. Watching your investments compound might give you more pleasure than you would get from spending it. If you value hard work and sacrifice, you take joy in seeing what you earned. Consider how you felt when you got your first paycheck from your first job. You probably had a joyous feeling of, “I did this. I earned this. With my own hard work.” Going from not being able to buy anything to able to buy something is an amazing feeling. The gap between struggle and reward is a big part of what makes people happy. I can still remember my first pay cheque from Tim Hortons – ah, what a glorious feeling it was! Sometimes the joy of spending can diminish as income rises because there’s less struggle, sacrifice, and sweat represented in purchases. It’s not that spending won’t make you happy – but it won’t be as thrilling and adrenaline-inducing as it was when there was more struggle behind each dollar. If you value experiences and rewards, you may be able to enjoy the fruits of your labour more. Spending money can help you connect with others and inject more 'fun' into life. Focusing on maximizing your present experience ensures you don't have regrets like Jack's above. As I think more about, and dig deeper into, this topic we can see that living a 'Rich Life' is less about money and more about mindset. Having sat down with hundreds of Canadians over 10 years in our practice, I can assure you that we all have different versions of a 'Rich Life' and no one has the best answer. Mine is different than yours, and yours will be different than your parents. One thing I know for sure; the peace of mind I build for clients with their personalized financial plan, based on their values and goals, is the most rewarding part of my job. It's the confidence and clarity to use their money for exactly what it is – a tool to achieve what they value most. Yours in wealth and health, Brandon Yanchus
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It’s the end of the 2022/23 RRSP season. If you’re over the age of 25, this likely isn’t a new experience. The ads and reminders to top up your retirement accounts are endless, and it seems like a mad dash to the March 1st deadline. Being the diligent investor that you are, you’ve maxed out your Tax-Free Savings Account and either set up monthly savings or contributed a lump sum to max out your RRSP contribution for the year. So, you are doing everything you should be, right? Probably.
But, what if I told you that there is a new problem arising in personal finance. What if you’re saving TOO MUCH for retirement? That’s right! You’ve worked hard your entire life, stocked away your savings diligently so that one day you can live on easy street and travel the world – or at least that’s what you’ve planned. It’s the concept of delayed gratification at its core; putting away money today during my working years so that years down the road I can finally enjoy retirement. But it really makes me wonder, are retirees really enjoying their fruits of their labour to its fullest? I look at my own parents as an example. (Hi Mom, I know you’re reading this and I love you!) My parents worked incredibly hard to put us through school and save for their retirement. Now at age 65 and 68 I am noticing they really hesitate to spend and enjoy their savings. They are not alone. Layer on the effects of a 2 year pandemic where spending for enjoyment was limited. This only increased Canadians’ savings to historically high levels. When you go from the mentality of ‘save, save, save’ from the age of 25 to 65, it’s not like a switch flips to make it simple to turn off that mindset to that of ‘spend and enjoy’ your wealth. I see this now more than ever in my work with clients and I know I am not alone. Countless studies are showing that retirees’ net worths are actually growing during retirement and consumption, and possibly enjoyment, is at historically low levels. So, how could you take a more balanced approach? Maybe the traditional mindset of working tirelessly, not taking that extended vacation or sabbatical in an effort to bolster up your retirement savings every year of your working life needs a revamping? I personally believe it does. We are now living longer than ever and more and more Canadians are pushing back retirement to either work longer or part time. Why? It could be because they haven’t saved enough. Or they just really love what they do and have no plans of slowing down – and that is okay. There is no one size fits all approach to saving for retirement, trust me. I think it’s the psychology of saving for tomorrow vs. spending today that needs work. We are taught from a very young age that saving, cutting expenses, and limiting ourselves as the only way to build wealth. How many headlines shout strategies to reduce spending by cutting out your favourite Starbucks drink or cancelling Netflix and limiting our lifestyle at the expense of a life with pleasure. While saving is incredibly important and something that I both practice and preach – we need to learn how to spend too. Having worked with clients in my day job as a CERTIFIED FINANCIAL PLANNER™ for 10 years, I can confidently say that most affluent Canadians are great at saving, and not so good at experiencing without worrying. What if I told you that I have personally witnessed clients pass away with 7 figures left in their retirement accounts? Sure they will pass on an incredible legacy for their family, church or charity and we have built that into their plan. But did they enjoy life to its fullest? What if they spent a bit more to experience the joys in life, instead of putting it into their bank accounts? Would they have been able to buy back more time? Would they have created more memories with their family? Could they be happier? I’ll be thinking, and writing, in the months to come about what it truly means to live a rich life. And (hint, hint) what if you don’t need to be a millionaire to live a rich life? Would you be curious to know more about why I think it’s about mindset, not net worth? Stay tuned. Yours in wealth and health, Brandon Yanchus |
AuthorBrandon Yanchus is a CERTIFIED FINANCIAL PLANNER™ with over a decade of experience. This is his personal blog where he shares what he's learned helping families, professionals, business owners and retirees grow and protect their wealth. Archives
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