When I first delved into the world of personal finance, I came across the idea that savers have trouble spending their money. Basically, the belief is that those who have saved all their lives are incapable of reversing their behaviour and spending their savings once they retire. I pooh-poohed that point-of-view. After all, how could being fiscally prudent be a bad thing? Or result in a bad outcome?
I promptly dismissed a perspective that I considered nonsense and happily continued along my own path of saving and investing. Save some, spend some seemed to be a far more intelligent way to use money IMHO. I worked my way up to saving a third of my paycheque for retirement. The rest of my take-home pay was spent on travel, concerts, home renovations, the daily Care-&-Feeding-of-Blue-Lobster, gifts for & celebrations with family & friends, and various other things. Surely I had it all figured out in my 30s didn’t I? Why should I even considered another way of seeing things when it came to how to spend money?
As they say, with age comes wisdom. It’s been many years since I discarded the notion that I would have trouble spending money when the time comes. Lately, I’ve been reviewing my own beliefs and taking another look at my own money habits. For more than 20 years, my method has been to rely on automatic transfers to fund my investment account. Rightly or wrongly, I picked out several mutuals funds then moved on to exchange-traded funds and invested my money into those investment products every single month.*** Every dividend earned has been re-invested through a dividend re-investment plan (DRIP). When I received raises, my contribution amount was increased too. A portion of each raise was invested for the future and the rest went into increasing my day-to-day comfort.
I’d thought I was doing most things right. Earn – invest – spend the rest. Looking back, I know that I didn’t pick the perfect investment products for my goals. (I’d been investing in dividend ETFs instead of equity ETFs. That “little mistake” was corrected in October of 2020.) With the benefit of hindsight, I see that I could have made better choices earlier in my investment journey but c’est la vie!
Today, I’m quickly approaching my anticipated retirement date. I’m quite happy about getting 100% of my time back. My work is mentally challenging and my colleagues are fantastic. I’ve been very fortunate in many aspects of my career. In spite of all of that, working at my current job until I take my last breath has never been a goal that’s made it onto my Bucket List. I’m very much looking forward to retirement. However…
I must confess that I’m feeling much more than slight trepidation about the idea of spending my money. The paycheques will stop and I will have to turn to other cash flows in order to continue paying for my life. And after a lifetime of money habits to save-save-save, it’s going to be a challenge to spend instead. My youthful self’s pooh-poohing is coming back to bite me in the butt.
Two years ago, I finally attended a meeting with a fee-only financial advisor. He told me that I was doing very well, and that I would have plenty for my retirement. He even told me that I could retire 2 years earlier than I’d planned! My financial advisor set up a withdrawal system for me… and that’s when it hit me. I would have to spend my money. Not all of it, and not all at once, of course – but I would have to spend some of it every year until my death.
Truthfully, the realization left me more than a little shaken.
Since then, I’ve also started listening to Ramit Sethi and his view on how to create a rich life. According to Mr. Sethi, who I do admire, I am not living a rich life because I haven’t yet defined what that would look like for me. In his estimation, I’m not using my money in the best way possible. While I’ve never been dissatisfied with my money choices, it would appear that I might not have been asking myself the right questions.
In addition to Ramit Sethi, I’ve started following Bridget Casey. She is another proponent of living a rich life. Now, she’s a few years younger than me so her life circumstances are very different than mine. However, she’s asking herself the questions now that I should have been asking myself when I was her age. Ms. Casey is also a fan of Ramit Sethi, so she’s building her rich life today. There’s a small part of me that wishes I had learned about this concept earlier.
So the question is the following: do I regret my money habits?
I wish I had a simple answer to that question. My money habits are going to allow me to retire 2 years earlier than planned. I will never regret that! At the same time, my money habits – particularly the one about never borrowing money to travel – prevented me from attending a wedding in Paris. I had just gotten home from Italy (or Spain?) when I received the invite to head back to Europe in a few months for a cousin’s wedding. My sinking fund for travel was empty and I didn’t have the funds to pay for the wedding trip in cash. So I declined the invitation. Do I regret that decision? Yes, but only a little bit.
Abiding by my money habits for so long has crippled my ability to make most decisions without considering the financial implications. Now, one of the biggest financial goals of my life is going to force me to amend my money habits. Firstly, I don’t need to save and invest anymore. I’m still not certain that I will stop completely or that I’ll ever feel comfortable turning off my DRIP. (My financial advisor said I should stop the DRIP when I retire.) Life without an automatic transfer into my savings/investing account is unimaginable to me, although I’m well aware that the vast majority of people do not save and invest regularly. That’s their choice and their choices aren’t my business, but if I’m not doing it – saving and investing – for myself then I start to feel rather anxious.
I’m very glad that I’m learning this about myself today, instead of after I retire. There’s time for me to start making some changes. One of those changes has been to decrease the amount of money that goes into my various sinking funds. I’ve redirected a few hundred dollars towards another goal, but I still need to get some advice from my accountant. Once I’ve spoken to her, then those few hundred dollars will probably go towards little day-to-day luxuries like a 4-6 hot-stone massages every year and a monthly housekeeper. My “rich life” might not be as grand as those of Mr. Sethi and Ms. Casey but that’s okay. Their priorities aren’t mine.
So I take it from me. Money habits should not be underestimated. Once you’re in a particular groove with your money, it’s going to be challenging to change them. While I’m still a fierce proponent of saving and investing, I’m going focus the next few years on figuring out how to spend my money too. I want my spending to bring me just as much comfort, joy and happiness in the next phase of my life as my saving-and-investing has brought me up to now. There’s a way to ensure I’m living my own rich life in retirement and I’m determined to find it.
*** There was an unfortunate 4-month hiatus during the most severe period in the 2008 recession. I could’ve been buying equities when the stock market was at its lowest, but I got scared and stopped my contributions. Trust me – I have since learned my lesson. We’re in another stock market downturn right now (2022) and I’m turning over the seat cushions to find money to invest in the stock market before this recession is declared over.