Have You Ever Encouraged a Client to Spend More Money?
Most successful people grew up working hard and saving money. That, probably, is why they are rich now. When you do a cash flow analysis as part of this client's financial plan, you quickly realize that they are never going to outlive their money. In fact, their nest egg is growing. They grew up believing, like their parents, that “debt is bad” and “it isn’t how much you make that counts, it is how much you save.” They are uncomfortable spending money and are living a simpler life than they deserve.
You have an obligation to give them permission and teach them how to enjoy the money they have saved. The familiar quip, “If you don’t fly first class, your children will,” applies here.
Here are some ideas on how they might use their money to further enjoy their life:
Update the family home.
This can be a good investment as well as a way of bringing pleasure to your everyday life. Most folks spend money to fix up their home in order to sell it. Why not do it now and enjoy it?
Buy that second home. Depending on your priorities, buy in a destination that will be attractive to the grandchildren. Renting a vacation home is great but owning is better.
Take the entire family on a vacation. This will build great memories for years. Friends of ours took their whole family (15 people) to Ireland for two weeks. They said it was the best money they’d ever spent.
Set up a Family Foundation.
Include all adult family members to serve on the board. Encourage them to present to the board charitable causes they are passionate about. Allocate funds based on well-researched ideas and the passion of the presenters. This will teach the family the value of giving back, leadership, roles and responsibilities on the board, teamwork and cooperation. Benefits also can include a small stipend and improved standing in the community.
Set up a Dynasty Trust. This can be set up as an incentive trust to encourage values and behaviors that the client wants to pass on to their children. This trust typically lives on for generations but isn’t funded until the death of the client. It is typically funded with a Second-to-Die life insurance policy. Once activated, it typically pays the blood relatives a small salary based on different achievements as directed by the client. For example, they might pay $10,000/year if the child graduates from college. If they get a Master’s degree, it might rise to $15,000 and a Doctorate to $20,000. You can add special payments for the birth of a child, becoming an eagle scout and weddings. Papa and Nana can be remembered on special occasions for generations to come.
Make a difference. Feel the joy of making a real impact by giving appreciated securities to your alma mater or favorite charity. Making money is fun; giving it away brings real meaning to your achievements.
Treat yourself. Whether it’s special occasions or exotic trips, fly first class, rent a private plane, and generally be kind to yourself. You are only going to be 65 once. You have earned it. My wife rented a seaplane for my 65th birthday and flew us to Key West for lunch, followed by a boat ride and a lobster dinner on Useppa Island. We have talked about it ever since.
Remember, clients are either spending too much or too little. They are rarely spending just right. Your job as their advisor is to make them aware of what they are doing and to help them to make better choices. Supernova’s 12/4/2 program keeps you in regular contact with your clients to make sure they are spending appropriately.
Suggested to read next: What to Say to Clients that Overspend