This piece is a case study on how giving a client meaning to their money can make a tremendous difference and make a real impact. A retired client worried about whether he had enough money – and how we could show him that he has more than enough and should in fact be spending more on the things that matter to him.
Start living life on your terms and giving wealth purpose
What does giving wealth purpose even mean? A couple of months ago, I shared a story about my money narrative – and how money doesn’t motivate me. The fear of not having money however does makes me anxious. If you missed it, you can read it on LinkedIn. The point was about how these money stories or biases stop us from living our best life. Today I want to share a story about how we encouraged a client to spend more money. Spend more you say? That sounds crazy. I say ‘encouraged’ was probably not the best word to use. Perhaps ‘nudged’ is a better word. Well, we just showed him another possibility to enjoy a life that he would really prefer, one that he never really thought was possible because of his money story.
Mr Retire Right
Here is the story. Mr Retire Right is 64 years old. Sadly, his wife passed away just before the pandemic. He has two sons, who both live and work in the UK. He has also recently become a grandfather. Mr Retire Right has been a conscientious saver for most of his life and has been very frugal with his money. He grew up in a household where there was a scarcity of money. His family struggled with making ends meet, and this was something that he was determined to make sure never happened in his adulthood.
He spent 40 years working for the same company and saved where he could. He owns a rental property, has some discretionary investments as well as a Living Annuity and a Guaranteed Annuity (that he purchased with the proceeds of his late wife’s retirement fund.) Due to his money story, he draws the minimum percentage from his living annuity and does everything to optimise his taxes. He remains anxious that he will run out of money – and therefore continues to live frugally. In his own words, he does so to ensure that he will not become a burden on his children one day.
His current scenario
We modelled his current scenario showed that given the set of assumptions we use for investment growth tax etc, that if all things remain equal, Mr Retire Right had the ability to live his current lifestyle until way past 120. He was truly amazed at seeing these calculations in a spreadsheet as well as visually in the graph. As his mindset was around scarcity, he never truly believed that he had enough money.
When we asked him what this new perspective now opened for him, he questioned whether he could afford to go his grandson in the UK sometime? Through a series of deep discussions around what he would want to achieve if money wasn’t a barrier, and developing various models, we were able to show Mr Retire Right a new possibility for his retirement plans. One where could go visit his grandson in the UK every year until 85 years at a cost of R100 000 per trip (he didn’t feel like he would want to travel after then). As well as being able withdraw an extra R10 000 per month that he wanted to spend on various charitable donations close to his heart. Despite this increase in spending, our scenario’s showed that he could continue to maintain this lifestyle post the age of 100
We have had some wonderful conversations about inter -generational wealth transfer and legacy options since these discussions. This has sincerely opened a new money story for Mr Retire Right. These meaningful discussions have given purpose to Mr Retire Right’s Wealth. They have offered him the ability to do the things that are important to him. Simply put, these actions allowed Mr Retire Right to give his wealth purpose.
Read Next: Financial Planning: The Ultimate Guide. It gives you a comprehensive overview of all the elements of financial planning in order to help you achieve what’s important to you and so that you can also give purpose to your wealth.