Years ago on our honeymoon, we were in Hawaii and wanted to experience a lūʻau. Hawaii, however, had other plans for us. That evening, storm clouds rolled in and a deluge forced a cancellation. While we still had a wonderful trip, that particular box remained unchecked. Years later and back in the tropical paradise, we were determined to try again.
It did not disappoint. The food was amazing (except the poi, which harkened back to my five year old self trying to bite into an alder branch). The show and dancing were delightful. The music soothed the soul. The fire juggling made our hearts race. The sampling of Hawaiian culture was the highlight of our trip. And the weather was perfect.
The buffet had a wild assortment of delicious foods. The first time I went through the line, I made a rookie mistake. I filled my plate and still had half the entrees and the whole dessert table ahead of me. Fortunately, as Brooke often reminds me, I seem to be a bottomless pit and was able to make another three trips through the buffet before throwing in the white napkin.
Therein lies a wonderful lesson and analogy about life and financial planning.
I have been through many conversations with people about their financial plans and goals. We talk about the future, and we spend considerable time exploring what they want to do with their income and wealth. We make plans and I show them if and how their plans can happen.
The fascinating part is that even three or four years later we will revisit the financial plan only to find everything has changed. The travel that someone was hell-bent on experiencing is no longer on the table as a goal. Or, the travel plans are double what we originally estimated. Health scares speed up timelines, retirement turns out to be short lived and clients find new jobs they love, or grandchildren don’t arrive according to our estimated timetables. This is completely normal; we pivot and rework the financial plan.
And sometimes no specific event takes place; people just change. One day someone realizes their job and values don’t align, or they don’t want to tour the US in their motorhome, or they don’t want to give up their community (or sense of self) by retiring yet.
This is why I almost always recommend a high likelihood of success in a financial plan; it might even be higher than they would ordinarily need to accomplish all the goals we list. There are things in life that we cannot predict. Our best life may cost more than we thought. We might retire sooner than planned. Some things take longer than we think they will.
And unlike the lūʻau buffet, you don’t get multiple passes at this life. The last thing you want is to max out your financial dinner plate and not save room for some of the things that could still lie ahead.
That is why I push clients to save a little more and err on the conservative side with our planning assumptions. You want extra room so when you see that incredible macadamia-nut crusted halibut at the end of the buffet table, you can pull the trigger. The halibut might symbolize the special 50th anniversary voyage you take around the world with your wife. It might be the extra you can afford to spend on your dream waterfront retirement home when another buyer tries to outbid you. Clients might need to spend more on the boat than they wanted (that happens a lot), take extra trips out to help their kids (or parents), or help their daughter buy her growing family’s first home.
My personal favorite is technology and healthcare innovations. This might be the biggest reason why I personally save more money than I probably need to. I know that something could come into the world that no one could have predicted, and we might want to be a part of it! In 20 years, I might be able to visit space as a tourist at a reasonable cost. There might be an expensive new treatment that extends life and health. Or maybe they find a better way to replace knees and hips? They might be expensive, but if you have prepared, you give yourself a chance to be a part of it. The world is full of opportunities, and fortune favors the prepared.
Some clients tell me that they don’t have enough time to take advantage of such things. But I tell them otherwise: clients who are retiring today could easily have 20, 30, sometimes even 40 years left to live. And 30 years ago, we didn’t have smart phones. Amazon didn’t have a website. The latest game was Tetris. The big one: laser tattoo removal did not exist. It drives my point home: things we might think are forever could be fixable or change a few decades from now, and having the money to take advantage of it is a great idea.
Another great example: several of my recently retired clients told me they were too old to go back to school, even though they thought it would be fun. I told them they were too young not to go back to school and reinvent themselves–retrain themselves–for their next chapter of life! Why can’t somebody continue to develop oneself in retirement? Culinary school, barber school, finishing that degree you started, courses at a local community college, picking up a new sport…the list is long, and the benefits of continuing to learn are vast. Having the extra wiggle room in a financial plan for personal development in retirement is a fantastic idea.
I know people who are determined to live the acronym FIRE, which stands for Financially Independent Retire Early. They save enormous percentages of their income to retire very early–sometimes in their thirties or forties. They tend to live life on a razor edge financially in the name of freedom with their time. But freedom isn’t just about time. Freedom is also about the ability to pull the trigger on something that you didn’t know existed. By over-optimizing their money, they can accidentally rob themselves of true freedom.
Another reason living below your means can be helpful: a retiree who is 50 or 60 now in good health might expect to live into their 80s or 90s based on today’s estimates. But if healthcare/technology improves, is it crazy to imagine possibly living longer? From 1950 to 2000, life expectancy increased by 8 years. By 2050, which many new retirees will live long enough to see, who knows how much life expectancy might increase? Better to have a little extra money left over versus running out too soon.
I always ask clients what financial success looks like to them at the beginning of our work together. Do you know what the most popular answers are?
Clients don’t want to worry about money. They want to spend without worrying if they are okay. Even for many high net worth clients, this is the first thing they lead with. When I ask them to tell me more about that, they say they want to spontaneously live life without worrying if they have enough.
To bring this analogy home, don’t hesitate to fill up your financial buffet dinner plate with things you love to eat. Live your life for today, not just tomorrow, but save a little space for the special and unexpected things too. After all, some of the best things in life are spontaneous and defy financial planning. Mahalo!
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