For many of my clients, wealth accumulation is fun. They enjoy saving money and seeing their net worth increase. But when they retire, some have difficulty transitioning into the draw-down phase. They’ve been saving for so long, that they don’t know any other way to live. Here’s some insight into how to find value after retirement.
Saving money is a game for some and a dread for others. One main difference is that oftentimes accumulators aren’t easily swayed by the latest and greatest stuff. They’d rather buy something that is a good value and use it for a long time. If you read The Millionaire Next Door by Dr. Thomas Stanley, you’ll see that one example of such items is cars. Millionaires on average kept their cars for 11+ years. One might say that accumulators look for value over material things. But in retirement, sometimes they have difficulty finding things to spend their money on. They find keeping their money more enjoyable than spending it. As one advisor shared with me about one of her accumulator clients that weren’t spending enough “I’m going to ride the same horse out of here that I rode in.” But what if you knew how to find value in retirement?
3 Tests for Finding Value
There are a few things that you can use to measure something of true value.
1. Does it last forever?
Something that lasts forever, you must admit, is a good value. But there are so few things that last forever. Cars don’t. TVs don’t. Boats don’t. What does last forever? Experiences! When you invest in an experience, you’ll have a memory that will last forever. Sometimes, investing in stuff can cause experiences that last forever. My Dad is always talking about the old cars he had. The car in and of itself had little value. But the experience he had with it, may have been priceless. When deciding whether to buy something or spend money on something, ask yourself – will this last forever?
2. Do both parties gain?
This one may not seem natural in our competitive invisible hand economy of winners and losers. Both parties need to find value in the transaction. You find it valuable, otherwise, you wouldn’t buy it. The person selling it is getting what they think is a fair price for their product or service. Therein lies the key – they get a good price AND you get a good value. When someone is genuinely happy and thinks they got a good value, the feelings are so delightful they tell everyone about it. And when someone sells all their good or services and makes a good living, they’re super happy too. Finding good value requires gains on both sides, never sacrifice.
3. Is there guilt associated with the transaction?
Nobody wants to buy something when they feel guilty. That’s why I always try to get my clients and family and friends to seek joy. For some, it’s easy. For others that aren’t used to being happy, it’s more difficult. Some people are just the low-energy complaining types of people. But ask them something about a hobby they are passionate about and you’ll see them light up with joy as they tell you all the ins and outs of their hobby. For me, when I’m faced with a tough decision, I ask myself, what would I LOVE to do?
While I’m not retired, I find myself hanging out with a lot of retirees. My golf league consists of mostly retired guys. I work with retirees helping them organize their money. And recently, when my volunteer efforts finished with a work-related association I am proud to be a part of, I asked myself – where should I volunteer next? Knowing that giving and receiving are the same thing, I then asked myself – what would I LOVE to get better at?
The answer was simple – golf. I love golf. I’ve always wanted to be better at golf. And I’m a huge believer that if you want to get better at something, you have to hang out with people that are better at it than you are. So I decided to volunteer for the Golf Association of Michigan GAM.
GAM has two main volunteer opportunities: refereeing matches and course rating. Last year I did both. One I enjoyed more than the other. I liked rating courses because it allowed me to see how courses are designed to make them challenging. I got to spend time outside. Afterward, I got to play the course I just rated. Win-win-win. All of these things will make me a better golfer too. Not to mention, I get to hang out with other golfers, many of which are better than I am, and retired. But I did it because I believe in giving and coordinating that with my passions.
Does volunteering pass my 3 tests? Unfortunately, no. My experience will last forever. Both myself and GAM gained from my volunteering. But I felt guilty about the time I spend doing a course rating. It takes all day and lately, I haven’t had that sort of time. That’s probably why retirees mostly rate courses. But it could pass this test IF I find a way to better manage my time. Maybe the best way to approach the 3 tests is if something you’re contemplating fails these tests, ask yourself, how can I help it pass? It might be as simple as changing your frame of mind.
Sometimes it’s hard for accumulators to pivot and start spending. Saving is in our DNA. It’s hard to all of a sudden start buying things when all your life you’ve found value in finding the best bargains and being thrifty. But you can find value in retirement. It’s a matter of finding something that brings you more joy than your money. You know you’ve found something really special when it lasts forever, everybody gains, and there’s no guilt associated with what you’re doing. For me, that’s found in experiences and not stuff.