From Scrimping and Saving to Spending - How to Flip the Switch

From Scrimping and Saving to Spending - How to Flip the Switch

Jay Gershman

As a financial advisor, I’m always interested in learning what my client’s dreams are for retirement. They’ve certainly had plenty of time to think about it. But what I see over and over again is that people spend so much time and energy saving, scrimping and juggling a lifetime’s worth of expenses, they have real trouble flipping the switch and digesting that they are ready to enjoy what they have worked so hard for. It’s time to start checking items off the bucket list and they simply can’t fathom the idea of creating it!

Understandably, entering the golden years of life can be daunting. For most people, decades of strategizing to afford the house, the kids, college expenses, and health care becomes ingrained behavior and when it’s finally time to enjoy the money that has been accumulated, people freeze. Part of this is fear and the other part is habit. Freedom can be a scary thing.

I sometimes meet people who unabashedly tell me that they have no intention of leaving their children an inheritance and look forward to spending all their savings. That conversation usually goes something like this: “Do you realize that for the past 35 years, you’ve actually only spent about $40,000 per year on you and your spouse?  The rest went to the mortgage, taxes, saving for college, saving for retirement, and paying for your parents. You couldn’t spend $100,000 if you tried!

So why is it so hard for people to truly celebrate retirement? The average 62-year-old was born from parents who lived through the Great Depression. Whether or not they realize it, their parents hugely influenced their saving, investing, and spending habits. While most pre-retirees are not as frugal as their parents, many have not had a real opportunity to find out what spending on themselves feels like. As they approach retirement, flipping the switch from scrimping and saving to spending becomes psychologically daunting. Most people are paralyzed by the idea that they are simply going to run out of money.

With that in mind, how can the average pre-retiree enjoy the years that they have worked so hard for, while still leaving a financial contribution to their children? The answer is all in the planning. Luckily, each of us has decades of spending habits and patterns to draw from, and the simple truth is that the bills and financial commitments we’ve had to deal with for most of our lives simply don’t exist in retirement. Houses and cars are paid for, college educations are no longer tugging at our purse strings, and our financial dependents are now all grown up. It’s actually quite simple for a professional to figure out how much you’ll need to enjoy the best years of your life.

I always build retirement plans based on a vision that’s rich with ideas and experiences - one that will create a fulfilled life for my clients. In most cases, money can be set aside to fund a travel budget with additional allocations for purchases such as cars and large home renovations. The key is to start early, but anything is possible with the right strategy.

The bottom line is this: enjoying retirement is no easy task. Understanding how much income you will have and need is key, but so too is creating a clear picture of what you actually want for the best years of your life. Most importantly, don’t wait until you’re ready to retire to start planning. Take advantage of time and get started now.  The only thing you’ll regret is not starting sooner.