Know Yourself: Conscious Retirement Planning

So you’re old enough to have finally purchased the house and made it a home.  You’ve molded your children into fine readers and artists as well as piano, soccer and lacrosse players.  You’re on the board of the local Y, you support the PTA and normally make a contribution to the offering plate when it’s passed.

How about your retirement plan—how is that coming along?  Do you have an inherent tendency making saving easy for you, or is it more difficult? Each of us has a saving personality on a continuum spanning a wide spectrum.  Are you a Spendthrift, a Spender, a Saver or a Hoarder (or somewhere in between)?  Your optimal retirement savings methodology depends on that answer.

 

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Most educators in the realm of personal finance take aim solely at those who find themselves on the left side of this continuum as if more is always better, so I’ll first address those predisposed to over-saving.   Hoarding is warehousing money simply for the sake of seeing it collect, not for a specific use or purpose.  This practice is idolized by far too many in the realm of money management, but hoarding is actually a financial disorder.  I’ve written recommendations for mandatory vacations in financial plans for hoarders to help break their addiction to stockpiling, and I don’t presume it’s a fault simply driven by greed—for many, it’s fear.

Those who lived through or felt the effects of the Great Depression saw such vast amounts of wealth decimated that many developed a scarcity complex.  A client I was blessed to call a friend passed away last year at the age of 87 with no lineal descendants and over three million dollars in liquid cash and investments.  The good news is that three worthy charities benefited from her generosity; the bad news is that she worked until she was 70, she never took a vacation (not once!) and she lived in a bad neighborhood in which she was burglarized and assaulted (but thought she couldn’t afford to move).

Conversely, a good friend and financial planning colleague of mine is living and battling with Cystic Fibrosis, a disease attacking the lungs which leaves its afflicted with a life expectancy of 37.4 years.  My buddy is married with two beautiful children and turns 37 this year.  He’s forced to be focused both on the future for his family’s sake (and hopefully for his sake as advances in medicine push towards a cure for CF), but he also recognizes the absolute necessity of getting the most out of every single day.  Tomorrow is promised for none of us, and our retirement plan should reflect that.

Am I, a financial planner, suggesting you could actually save too much for retirement?   

Absolutely!  I’m not demonizing any particular level of net worth, but you may be socking away as much as humanly possible for your future even to the detriment of your (and your family’s) present.    Many advisors will, driven by their economic bias to manage your money, use the save-for-your-family’s-future guilt trip to wrench more of your dollars into accounts they can oversee.

It is also important for me to acknowledge most of us are actually more inclined to lean in the direction of the spendthrift than the hoarder.  It’s easy to over-value the present because we can see, touch and feel it today.  And many of us have so many pressing concerns demanding attention and funding, it’s only natural for deferred gratification to take a back seat.  So my calls for balance between your future and present plans should not be received as a blessing to underestimate the importance of saving for the future.

The key, therefore, is to know yourself and be honest about your strengths and weaknesses pertaining to saving and spending tendencies and patterns.  

If you’re a spendthrift, you may likely need some form of intervention.  You may need to institute personal austerity measures—like the governments of Greece and Ireland—or introduce some level of accountability with a mentor of sorts.  If you’re a spender, it is likely you can effectively train yourself by setting up automatic savings mechanisms, diverting funds directly from your checking account (or paycheck) to the buckets you’re filling for the short-, mid- and long-term.

A sign you’re a natural saver would be that extra cash piles up each month—seemingly effortlessly—but you may also judge and condescend to family and friends without the same innate advantage.  If you’re a hoarder, you too may need intervention…to force yourself to spend!  One of the best ways to redirect in this regard is first to offer your services—not your money (at least initially)—to a worthy charitable organization, like a homeless shelter.  Or go on a mission trip to a third-world country and see how people live with nothing.  I’m not trying to guilt you into giving your money away, but to demonstrate how people with absolutely nothing may experience more happiness than you.  You’ll have to experience it to believe it.

Retirement planning is not a science, but behavior management is.  By better understanding yourself and controlling the only economic assumption over which you have absolute control—YOU—you’re likely to better enjoy your retirement, and all the days leading up to it.

*This post will also be appearing on TheStreet.com.

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How to Spend $1 million at Starbucks (in 90 Seconds or Less)

It's good to enjoy nice things.  It's good to be detached enough from the currency in our pockets that we're willing to part with it for the occasional extravagence.  But the cost of habitually indulging in what may even be seen as a little thing–like a cup of coffee–is nothing short of amazing.

In this short video, I tell a TRUE STORY about a friend of mine who found himself on a path to "spending" $1 million at Starbucks.  Check it out to see how!

 

 

Vacation Blues in 90 Seconds or Less

I’m on vacation this week, so last week, my buddy and media mogul, the venerable, Ben Lewis, and I laid down a quick 90 second video blog to help you best enjoy YOUR summer vacation this year, and the next, and the year after that…  I hope you enjoy it!


Guest blogger, Jim Stovall, on “Spending and Saving”

One of the most important things I've learned in educating and advising in the arena of personal finance is that no one person has the market cornered on wisdom… and I'm certainly no exception!  Therefore, in order to make the information in this blog as comprehensive and beneficial as it can be, I will be inviting guest bloggers of varying specialties on a semi-regular basis to share their wisdom with us. 
 
It could be no more appropriate, then, that my first guest blogger is Jim Stovall.  Jim has more illustrious titles than I have letters in my name, but my personal favorite is co-author.  Indeed I'm humbled that in addition to selling over 5 million copies of The Ultimate Gift, Jim saw fit to put his name beside mine in our recently released collaboration, The Financial Crossroads: The Intersection of Money and Life.  This week, Jim shares with us from his weekly column, Winners Wisdom.   
 
Enjoy!
 
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Spending and Saving

by Jim Stovall

Whether you make millions of dollars a year or earn minimum wage, there are only three things you can do with your money: You can spend it, save it, or give it away.
 
Your spending may range from absolute necessities to outrageous luxuries. Your savings may be prudent investments or coins in your piggy bank. And your giving may be coins you drop in a donation jar or launching your own foundation. But there are still only three things you can do with every dollar.
 
Financially successful people make sure that each dollar is divided between spending, saving, and giving. Traditionally, Americans have been a very giving and generous group of people. This generosity fluctuates some but remains strong, even during difficult economic times. If you’re not giving away part of every dollar you earn, you’re missing a great opportunity and one of the true joys in life. While, as a society, our giving can always improve, we seem to be doing fairly well overall.
 
The problem arises when we make the decision between spending and saving. Savings rates in America are dangerously low and, in some sectors of the population, the savings rate statistically actually drops below zero. You may wonder, as I did, how it is possible to save less than zero.
When I researched the statistics, I found that many people today are spending significantly more than they earn, and the disparity is showing up in their credit card balance, line of credit, or other debt instrument. This is a dangerous practice as without long-term retirement investments, your golden years may seem more like aluminum foil than gold. Without some emergency savings, you are like that pilot flying his plane 50 feet off the ground. While it might work for a little while, sooner or later, you will crash and burn if you don’t leave some margin of error in the form of a cash reserve.
When we look at global savings rates, we find that Europeans save 20%, Japanese save 25%, and the Chinese save over 50% of their income. This is fascinating when we consider that economic growth is thought to be fueled by spending, but China has one of the fastest-growing economies while their people are saving half of their income.
Global statistics are interesting for study or theoretical discussions but really don’t matter to you and me. The economic conditions on Wall Street or The White House should not concern us nearly as much as the financial picture on our street at our house. There are many ways to calculate the best way to spend, save, and give our money.
In my newest book, The Financial Crossroads, my co-author Tim Maurer and I explore a number of ways you and your family can win with money. We offer many calculators and other tools you can use to get the information you need so you will know what to do; however, it’s important to realize that financial information abounds. As in most things, with money we don’t fail because we don’t know what to do. We fail because we don’t do what we know.
As you go through your day today, commit to get the information you need to make quality financial decisions and then act.
Today’s the day!
Jim Stovall is the president of Narrative Television Network, as well as a published author of many books including The Ultimate Gift. He is also a columnist and motivational speaker. He may be reached at 5840 South Memorial Drive, Suite 312, Tulsa, OK 74145-9082, or by e-mail at Jim@JimStovall.com.