One of the biggest paradoxes that exist in a financial plan is simply put: the best savers are often the worst spenders.
This is because they are always looking for ways to save money, even if it means sacrificing their own comfort or convenience. They are frugal, disciplined, and diligent when it comes to managing their finances. And as a result, they are able to put away large sums of money over time. But all that saving comes at a cost. Because the best savers are also the people who are least likely to spend their money. They live in constant fear of overspending and often deprive themselves of the things they truly want in life.
I was playing golf last summer with a good friend of mine who is very successful. He was telling me how he used to enjoy spending his money on nice things like cars, watches, etc., but now he gets the most satisfaction out of seeing his accounts grow vs spending on nice things. This is not uncommon for many clients in busy professions. Many people that find great success in their career are very disciplined and goal focused, and they treat their finances the same way. They save for financial independence goals or for kid’s education, and they end up getting into a habit of saving just to save vs saving intentionally and making sure that they are enjoying their money by balancing this with spending along the way. These clients tend to struggle with balance in all aspects of their lives, and this is where some coaching comes into play as a financial advisor to make sure that clients are enjoying their hard earned wealth.
Every financial decision has a financial aspect and a peace of mind component to it as well. Our job as financial advisors is to make sure that we are giving clients advice that is not just the best financial decision, but also aligns with their core values and gives peace of mind to making key decisions. This is especially true when it comes to retirement planning.
In our opinion, if a client “over accumulates” assets when they get to retirement, and has no goal of leaving a legacy for charities or kids, then some calibration should have occurred in their 30’s through 50’s. We have seen far too many situations where we begin working with a client that is in their 60’s with a large net worth where they are stressed financially, and they have no idea when they will be financially independent. Many of these situations end up where the client works at a very high level into their 70’s, they end up with health problems, and they never get to enjoy the money that they accumulated.
Sometimes a greatest strength can flip on us into our greatest weakness. And saving to save, or accumulating to accumulate can be one example of this.
For some, a great plan may be accumulating as much as possible because that is what brings them peace of mind, they want early financial independence, and they also want to leave a legacy for their kids.
For some, a great plan may be accumulating just enough to fund college, retire at a reasonable age, and then not leave a legacy.
There is no right or wrong answer in a clients “why” or their goals.
But there is clear evidence that shows goals and value based accumulation of wealth helps people ensure their wealth is supporting their life by design (and not the other way around).
This is why our firm is called Equilibrium Wealth Advisors, so that we can help create equilibrium and balance. This is best done by clearly understanding client’s values and goals, and making sure that their balance sheet and financial plan is always in support of these. Often this means training clients that have been in extreme save mode to spend more money and enjoy the fruits of their labors.
More specifically for a client entering retirement, they have generally spent their whole career, learning how to generate a high income, and also have done a great job of saving to accumulate a high net worth.
How are you balancing the competitions and paradoxes that exist in your financial plan?
Equilibrium Wealth Advisors is a registered investment advisor. The contents of this article are for educational purposes only and do not represent investment advice.
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