The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.
The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.
How to make worry melt: As an expert worrier, I often wonder why I worry, even when I know the answer: Worry gives me a (false) sense that I will be prepared and in control. It's my fallback when I feel out of my league. Take this example. One of my biggest worrying times happens before I head to the airport. What am I so worried about? Unlike many, it's not the actual flight. It's about missing the plane. It feels silly to even write this. And yet, Butterflies in my stomach. Little waves of nausea. Tight chest. It happens nearly every time. And I have coping mechanisms: I tell myself things like, "Breathe.“ "Calm down.” “It’s going to be ok.” I even have a special spirit animal - a deer - that I think about to help me feel better. Additionally, as a result of this predictable worry, I have an irrational need to leave home at least two hours ahead, get to the gate an hour before the flight, and, when I get there, to sit where I can see the gate agent and the boarding door. Then there is this acute physical transformation. Once I can see the gate and hear the agent, my entire nervous system relaxes. It feels like the worry just melts. Expected and Unexpected Worries How silly this feels. And yet, it seems I am not the only one to worry about expected and routine things like a departing plane. It's expected and routine, yet a source of great worry, that teenage children will start driving, and that 90-year-old parents should probably stop. In working with money, it's a source of great worry, yet expected and routine, that stockmarkets, interest rates, and gas prices will rise and fall repeatedly. Upcoming retirement is expected and routine, yet a source of great worry (and excitement). Understandably, it's a big step into an unknown future. That can especially bring on the jitters. Adding to everyday events are unexpected random ones, like pandemics. Further, sudden market meltdowns, tsunamis, cancer, dementia, layoffs, election surprises, terrorists, and hacker attacks are all things we know aren't probable, but are possible. Just checking in - how's your heart rate now? Butterflies? Tight chest? Although we might prepare as best we can, worry on top of preparation helps some feel as though we are doing something about the problem. But what toll does worry take? Does it help us to prepare that much better? As a result of worry, I'm quite sure I have shortened telomeres and life expectancy. That's a pretty high cost. How To Melt the Worry Away When I get to the gate and see the agent, I feel the worry melt away. But it's strange - I don't think too many airline employees worry about the same thing I worry about. There's something about having exposure every day to systems and knowledge that produces confidence. Aviation is now one of the safest modes of travel in the world.…
What's your closet type? Thrifty Penny, Generous J-Lo, Savvy Suze or Imelda Galore On a 2004 visit to Ghana, a west African country, I noticed lots of people wearing second-hand Western clothes. While others donned beautiful traditional garments of their country, it was equally common to see second-hand t-shirts, khakis and jeans. The second hand clothes were sold in nearly every street market. My hosts told me these were commonly called obruni waawu, which literally means, “dead white people’s clothes.” I understood that the clothes looked like those of white Westerners, but “Why dead?” I wondered. Before long, an answer dawned on me. Maybe to Ghanians, many of whom don’t have closets, the only reason a white Westerner would give away perfectly wearable clothes would be because they are dead. To them, clothes might be something you use up until the day they are no longer needed at all. I don't know if this is the actual reason, but it led me to compare and wonder how often we buy new clothes and get rid of old ones. For some, it's quite frequent, and not so much for others. Having seen over 400 budgets in my lifetime, I've noticed spending on new clothes that ranged from $2,000 to $50,000 a year. But what I have not asked and do not know is, how often are the old clothes being thrown out or given away? Money Velocity and Money Supply: Closet Velocity and Clothing Supply There are two concepts in economics that come to mind - money velocity and money supply. Money velocity refers to how many times a dollar changes hands in an economy. There is also money supply, which is the amount of money available in an economy to be spent at any time. Taking this to the closet analogy, what would closet velocity and clothing supply be? Let's say closet velocity refers to how often the clothes on hand are changing. This would mean not only how often new ones are bought, but how often old ones are discarded or donated. Correspondingly, the amount of clothes we have on hand at any point in time would be our clothing supply. Taking four combinations from these two concepts and having some fun with the names, what's your closet type? Closet Type: Thrifty Penny, Generous J-Lo, Savvy Suze or Imelda Galore If you have a low clothing supply and low closet velocity, you might be a Thrifty Penny closet type. This means: you have a small number of clothes that you wear until they have holes, stains, or are otherwise unusable before you replace them you feel ok not being trendy there aren't a lot of choices of what to wear, and you don't require a large closet. Conversely, if you have a high clothing supply and high closet velocity, you started with lots of clothes, are buying lots of new clothes, and are also giving or throwing away old or never-worn ones fairly frequently. This would be the Generous…
The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.
Financial anorexia: Stuck like Scrooge. What is financial anorexia? Financial anorexia is a type of spending disorder. People who suffer from the eating disorder of anorexia may obsess about food and the number on the scale. People who suffer from the financial disorder may obsess about money and the number on their bank statement. For those suffering from financial anorexia, they never believe they have enough to enjoy what they’ve got. According to Ken Donaldson, LMHC, a licensed mental health counselor in Seminole, Florida, “Anorexia is characterized by a distortion of perception.” Someone suffering from the eating disorder believes they still need to lose extra pounds, when to everyone else it’s clear they are harming themselves. Someone suffering from the financial one believes they still need more money, when it’s clear they are depriving themselves. While the eating disorder of anorexia is deadly serious and can be fatal, financial anorexia can be dangerous in other ways - to mental health, friendships, and family relationships. Financial anorexics can seem to be more engaged in extreme deprivation than in enjoying life's simple pleasures. Family members are most often affected by the wealthy relative whose reluctance, reclusiveness or reticence are, at a minimum, puzzling, but more often, hurtful. Where Does Financial Anorexia Come From? According to Donaldson, anorexia is fueled by isolation - the more the sufferer depends upon their own distorted perception, the worse their condition becomes. Ebenezer Scrooge (in the beginning of Dickens’ tale) is an isolated penny-pincher and money hoarder. He is the stereotype of the financial anorexic. Another root cause can be fear. What are anorexics often afraid of? Stated fears might include: a catastrophic world event; a very expensive health issue; hyper-inflation; or “spoiling” family members or friends. Certainly some of these things can and do happen. Yet our societal messages, and brains wired to look out for danger, emphasize catastrophic scenarios like these past the point of their actual probability. Yet, other fears might be at work that aren't as overt. Unstated fears might include loss of self-worth or security. Anorexia is also fueled by our cultural norms. Western society still worships conspicuous wealth and Twiggy-like figures. “You can’t be too rich or too thin,” sums it up. Most people understand the “too thin” part, but “too rich”? Is it possible to be "too rich"? Financial anorexics, like Scrooge, typically amass abundant resources. However, their wealth does not come from a healthy relationship with money. They might be "too rich" for their actual needs. Further, the more they have, the more they have to fear losing. The hoarding-like behavior only gets worse the more successful they are at it. What Can Be Done About It? At some point in life, many financial anorexics realize, to their immense regret, that they worried more about what might happen, and didn't, than enjoyed what they actually had. Exposure to new information sources is one method of help. According to Donaldson, “New information will disrupt the pattern.” Support groups, a counselor, and…
How to let go of money self-doubt: What is money self-doubt Money self-doubt is an inner belief that one cannot trust themselves with a decision about money. Sometimes these beliefs operate in the background, quietly driving decisions when we don't realize it. Other times they're front and center. What does money self-doubt sound like? Money self-doubt beliefs often sound like critical messages: "I knew I'd screw it up." "I'll never be good with money." "If I can't manage my own finances, I'm a failure." "Why am I so stupid with money?" Money Self-Doubt Origins Where does money self-doubt come from? It could be a single traumatic event or a repetition of harmful moments that lead to flawed beliefs about our financial capabilities. One time being taken by a scammer, or many times being told by an abuser we aren't capable. Without counterbalancing mantras like, "You're still OK." "You just made a mistake." "You can do this." the self-doubt can take hold. Society and media also don't help, offering a choice of money self-image as either, "good with money," or not. Individual instruction is rarely given in school, or in families, much to our society's detriment. While financial professionals are often proficient in finance, many are not good educators. A few even try to make money more complex than it is, to keep clients feeling less than sure about themselves. Case Study: Sondra (not her real name) is a highly educated and accomplished professional. Her parents came from Depression-era families where money was tight in their younger years. Money was never talked about in Sondra's home, although she was given everything she needed. She grew up with the belief that her parents didn't discuss it with her because they believed money was something she was not capable of handling. When she went to talk with a financial advisor, he threw so much jargon at her that she was too uncomfortable to admit she didn't understand what he was talking about. Money Self-Doubt Results Without realizing these beliefs exist, we can allow them to influence what actions we take or fail to take. Self-doubt can affect who we allow into our lives, and who we don't. It can affect our choice of career. Or how we spend, or choose not to, on our own needs, wants, and wishes. Ironically, money self-doubt can lead to overspending with some people, and over-deprivation with others. Sondra chose a career where she was assured a salary and the chance of a bonus if she worked hard enough. She worked longer hours than she wanted to. She lived minimally, foregoing many comforts and rewards of her hard work. Her dreams of having more work-life balance were put on hold because she never felt financially secure. In her personal life, she chose friends and partners who also didn't talk about money, leaving a gap in her closest relationships. How To Let Go of Money Self-Doubt If you've been operating under flawed assumptions, and now you know it,…
Money values, behaviors, habits, and change: Perhaps there is something about middle age, or a pandemic, that creates the urge to examine values, behaviors, habits, and change. At my 25th college reunion, I had breakfast with a college friend who worked for our alma mater, Davidson College. She had attended lots of reunions. I asked about her observations of reunion attendees. She said something like, “At the 10-year mark, everyone’s comparing notes – who has how many kids, who has graduate degrees, what they did for vacations, what kind of home they live in, etc." In other words, their money values tended to be focused on status. "By the 25th, nearly everyone has experienced some kind of life event, and they are a lot more mellow. The other stuff must not seem as important.” So, values shift as life unfolds. Values drive behaviors, which become habits. When we begin to question the behaviors and habits, we become ready for change. And that's how growth happens. Eventually this process can work its way into finances. Beginning to Examine Behaviors - Eating Habits My own path to behavior change didn't start with money. It started with eating. One of my first experiences with behavior change was through Weight Watchers. I was 35 years old, 5'3" and 15 pounds overweight. I decided that I valued being healthy more than enjoying unhealthy food. I lost 20 pounds and gained 5 back, but kept it off. How did I do it? Tracking and accountability. Whenever my clothes got tight, I would write down everything I ate. This helped me track and change my eating behaviors permanently. Ironically, tracking and accountability had come naturally to me with money. I wrote my first budget at age 9, and had tracked my money ever since. This made me a good saver, but later I learned it didn't necessarily mean I had a good relationship with money. Conversational Habits Next I moved to healthier conversation habits. The values of listening well and feeling heard became more important. I learned that “listening” does not mean, “Wait until the other person is finished talking so I can say what I want to say.” Listening means to suspend all noise and chatter in my head; and reflect on what I am hearing. To eliminate the noise and chatter, I acquired a rule: Anything that I want to say while someone else is talking, I am not allowed to say. Like any other habit change, it took conscious effort at first. When I think of something I want to say, I let it go, stay present, and listen. I found that, if I truly wanted to understand someone then what I wanted to say would have gotten in the way of that. My conversational habits, and relationships, improved. Money Values, Behavior, Habits and Change My money habits needed improvement too. I used to overtrack my spending and worry unnecessarily about it. This led to a habit of denying myself some things that would…
The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.
Behavioral economics, with its long lexicon of “biases,” has enjoyed great popularity for a couple of decades. However, it's also one area where financial planning students feel the least prepared. Experienced advisors, too, find this relatively new field fascinating, but yearn for practical ways to apply it, especially amid the market volatility of the past couple of years.