Written By: Andi Wrenn, AFC®
A lot of time is spent on setting financial goals, saving money, and reducing spending on wants for months or even years. Then comes the time to spend that money that took so long to save. It is great when our clients are excited about saving money and making SMART goals when it comes to putting money away for big ticket items or retirement. As financial professionals, we need to remember the emotions, concerns, and sometimes anxiety when it comes time to spend saved money. You may have examples of clients you have worked with that have experienced these types of reactions when flipping the switch from saving to spending. You may even have experienced this yourself.
The Big Ticket Item: I worked with a military client that had saved money during a deployment for a specific purchase several years ago. They wanted to treat themselves to one item upon their return. They saved every penny they could during deployment, and less than 20 percent of what they saved was planned for the purchase of a big screen TV. This client felt so conflicted about spending the money they saved. I helped them work through the plans for the remainder of the savings to work with their values and goals. The client had no debt and a great plan to become financially independent. Eventually they were able to spend the money and purchase that TV. Although it took 4 months.
Too Late: I had distant relatives that invested a lot of money over their working lives. They had everything paid off, money in savings, and an investment portfolio over $2 million. Upon retirement they were unable to spend the money to do the things they had talked about doing for years. They wanted to travel the world in retirement. When they died unexpectedly in their late 60’s, they had only traveled out of the state a couple of times. People talked about what a shame it was they were in a car accident, a mile from their home, and they weren’t able to enjoy the money they worked so hard to save. After years of financial discipline, spending it was just too hard and they didn’t have the time they expected.
Health and Convenience: Another example shared with me is another AFC’s parents. They receive a pension, social security, and plenty of money in savings. When the time came to travel across the country, they were so conditioned to spend the least amount of money possible, they booked a trip with two plane changes which didn’t arrive until the next morning due to delays. In their 80’s with some health issues, it would have been better for their health and age to book a direct flight arriving at an earlier hour. Seniors need to consider their health and convenience when they can afford to do so.
Do you know people who you are concerned won’t be able to flip that switch to spending? Maybe you even recognize this in yourself? So let’s move to ways to begin talking with clients about their plans to spend their saved money. We have strategies for saving, but what about helping clients with strategies for spending.
Find ways to spend a little. Helping clients find ways to spend some of the money they have saved can help them ease into flipping that switch. Are they getting older and is it more difficult to get out? Then maybe using grocery delivery is a splurge that would make sense. Or perhaps a special pampering like getting a massage once a month. Finding something small to spend money on can give them a taste of how spending is ok.
Talk about how spending can align with their values. Find out what cause(s) the client feels strongly about that would make them feel good about spending money. Have they saved for years to make the lives of their heirs better. By using some of their funds to help family members, or help a cause that is close to their heart, they can get some practice spending money. Discuss funding a family vacation so they can be there to watch their heirs enjoy precious time together.
Traveling is a big topic I hear people mention as something they save for and also plan for in retirement. When working with people who are hesitant to spend their money, travel can be a good way to start flexing that spending muscle. Before retirement, a few trips can be taken to get used to spending money. They can decide if they enjoy it, and can test different levels of elegance. Then, when retirement comes, they may have a better idea of how to spend their money on travel without feeling the guilt. Encouraging seniors to buy trip insurance may ease their concerns on having to cancel due to health or needing additional health care while traveling.
Did your client save up to pay cash for a house or other large purchase? Taking all that money out to put on one item can be emotional. They may feel it just isn’t possible to actually do it when the time comes to make that purchase. You can help them talk through their plans and decisions to ease the stress. Creating a timeline of the best time to make the purchase may lower anxiety when it is time to make a larger purchase.
Clients may need to seek out a mental health professional if the anxiety or lack of ability to spend becomes a big problem in their life. So remember that you can refer them if you feel it is appropriate.
When it comes to move from saving to spending, we as financial counselors and coaches can help our clients realize the financial goals they set. Begin talking to clients when setting goals and working on retirement planning about how they will spend when the time comes. Setting timelines and role playing each step will allow them to discuss their struggles and concerns with you. This will help clients think about it long before the time comes to spend their savings and turn it into their dream come true.