Betsy and Steve Berger were retired veterinarians. Having read David Kennon’s book, You Never See a Hearse Pulling a Trailer, they viewed their retired lives with a sense of opportunity and encouragement.
In fact, they liked the book so much that they bought several copies and gave them to all their friends and family.
Betsy and Steve had a couple of important questions to answer.
While they wanted the family to get some of their modest wealth, they also believed strongly in enjoying the money in their retirement accounts. After all, they had saved that money all their lives into retirement accounts for their retirement.
After investing their money in a diversified and balanced portfolio of stocks and bonds, Betsy and Steve put together a plan. With their $700,000 IRA, they knew they could safely spend 5% of the portfolio (or around $3000 a month).
Betsy and Steve always lived very frugally and kept a close eye on debt. Now retired, they owned their house, cars, and paid their credit card bill each month. Their monthly budget was quite low, and their Social Security covered the basics.
So they used the $3000 a month to check off their bucket list.
First was travel. They rented a camper and traveled the country with their dogs. “The U.S. is such a beautiful and diverse country. We might as well check out the homeland before traveling abroad,” Steve mused.
Over the next couple of years, they hit all the spots: A European river cruise, skiing the Alps, hiking up Machu Pichu, an African safari, and they even lived in a hut (called a yurt) in Mongolia for a month.
But after a few years, they grew weary of travel. “There’s no place like home,” Betsy reflected, “I’m getting tired of traveling. I’d rather be here than anywhere else.”
So they put the extra money into making their home perfect. They started with a new kitchen and master bathroom. Steve did some of the work which saved them a good bit of money. A new deck, new windows, and new flooring followed.
One day, five years into their retired years, Betsy commented, “Now what? We don’t want to travel, the house is just the way we want. What’s next?”
“Well,” Steve chimed in, “I suppose we can just reinvest the extra money each month. There is no point in buying things we don’t even need. I guess I could buy a new truck, but there is nothing wrong with the one I have now.”
So that’s exactly what they did. Instead of depositing money into their bank account each month, they just reinvested it into their portfolio. They were destined to die millionaires.
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“Why did you tell me this fascinating tale?” You may be asking yourself.
It’s because I’m seeing this exact scenario playing out over and over again in my office. Clients see their portfolios going up more than they expected, their expenses are lower than they expected, and many of them are coming to a startling revelation: Sarasota is paradise. People travel here for vacation.
So what do most people do? They revert back to their old ways. They save save save.
This is where I really struggle. A veteran of the industry, I don’t have a great answer for this situation. It is not my place to tell you what to do with your money. It’s very easy to fall back into thinking, “Well, I guess I should continue to save because you just never know.”
This all comes back to a cliche. “Money doesn’t buy happiness.” But, man, that is the truth.
In my experience, most of you are happy with a nice simple house in a nice simple neighborhood. You want to live a life where you don’t have to count every penny. You want a life where you can basically do the modest things you want to do.
You will pretty quickly discover that the luxury of “doing what you want” wears off pretty quickly. You may do a couple of things, and then say, “I guess, even though I can, I have no interest in actually doing it.”
In my experience, if you can bring $2000/mo into your household above and beyond your budget, you can do what you want. Most people don’t want a $50,000 month-long Alaskan cruise. Who wants to be away for a month?
So if you are bringing in $4,000 or $7,000 extra each month, you will not live a different life than the $2000/mo people.
These millionaires come into my office and pretty quickly find that their money can only take them so far. Having $2,000,000 in your portfolio doesn’t feel too good when you are having problems with your kids. Money cannot solve most problems.
I guess the point I’m making is this: Being “rich” is totally overrated. As long as you have enough to live, money makes almost no concrete change to your life and your happiness. All I do is talk money with people like you every day. I cannot emphasize this enough. Relationships create meaning. Not your portfolio.