Five Steps to Breaking the “Bad” Habit of Saving Too Much Money
According to the Government Accountability office (1), while 50% of this country has no retirement savings to speak of, 50% HAVE prepared.
If you are part of the group of savers, for the past 50-60 years you have been building up very useful and important habits in order to be financially ready for retirement.
- You’ve learned to “pay yourself first,” and save money out of your paycheck into a retirement savings plan each month.
2. You’ve learned to budget. If you can’t afford it, you don’t buy it.
3. You’ve learned to limit your debt. You pay your credit cards off on time. Your mortgage is either already paid off, or you have a reasonable monthly payment.
4. You’ve learned to live below your means. You know that keeping up with the Jones’s is a losing proposition.
5. You’ve learned to delay gratification. Just because you want something, doesn’t mean that you should get it.
Now are you ready for the ultimate irony?
These very (healthy) habits you’ve formed over your lifetime can actually sabotage your retired years.
You can’t stop saving.
You can’t bring yourself to buy a $12 glass of wine at a nice dinner.
You decide not to attend that pricey family reunion at the Marriott in Chicago.
Instead of getting a personal trainer at the gym, you try to get in shape on your own.
If you stop saving, you may end up eating cat food and working at Walmart, right?
Let me show you the rules of the Retirement Revolution.
1. Only hire a financial advisor if you need one.
2. Invest your money in a diversified portfolio of stocks and bonds, with at least half of the money in stocks.
3. Take 5% of your portfolio each year and spend it.
4. If you have extra money left over at the end of the month, DON’T SAVE IT. Your saving days are done.
5. Focus on what you should be focusing on; living your best life possible!
What we are asking this Baby Boomer generation to do, once retired, really isn’t fair. It is like asking a professional tennis player to hold the racket with his left hand after 30 years of playing with his right. How do we expect you to radically change your view on money after decades of living frugally?
But I have great news! With a little bit of planning and education, your paradigm will start to shift. Slowly at first, but before long you might find yourself spoiling yourself and your grandkids more. You might find yourself loosening the grip and saying, “It is ok to spend some of the money I saved specifically for this time period in my life. The world is my oyster!”
If you find yourself really struggling with letting go of some of your hard earned savings, you are not alone. It is an epidemic best expressed in a recent Federal Reserve survey that pointed out retirees in this country are dying with nearly twice as much money in savings as the day they retired.
But not you! At your funeral (many, many years from now) your friends and family are going to say, “Man, that was one generous person. They lived with a sense of freedom and fearlessness I’m jealous of. They really did retirement right….”