It seems like more and more people are being lulled into simply “renting” their chosen lifestyle rather than choosing to “buy” it.
What does that mean? Lifestyle “renters” spend all of their available cash flow – and sometimes more – on their current needs and desires. They don’t allow for the fact that their current employment-based cash flow isn’t going to last forever. And so they don’t make it a priority to “buy” a period of future financial independence for themselves, one where they can live without working, on their own terms, for as long as they want or need.
The future, however, has a way of arriving, eventually. As a result, as their employment changes or ends, lifestyle renters almost always face having to make changes in their lives that they did not anticipate and do not want. And that can be a tough road to travel.
Your Brain Can Trick You Into “Forever Thinking”
Human brains are optimized to focus on things in the here and now. After all, if we can’t make it through today, we’re not going to see tomorrow, or the next day. It’s an ingrained evolutionary response, and an understandable one. So it’s all too easy to let our brains trick us into thinking that the cash that shows up in our bank account is all available to spend now, and that nothing about that is ever going to change.
It takes an act of willpower to step back and put things into perspective. Sometimes it’s FOMO, sometimes social pressure, and sometimes just mental laziness. But for most of us, it’s a challenge, perhaps especially for successful professionals. Professionals today face demands that require a great deal of rational thought, and rational thought requires a lot of effort. So spending can easily become a pressure valve, a part of our lives that we don’t need to work on. An aspect of our lives where it feels good not to have to think, good to simply act on our instincts and desires.
You Can “Buy” A Future That You Truly Want
Yet the tendency to ignore the longer-term consequences of today’s choices is a terrible strategy for those of us who depend on money to enable our lifestyle over time, both during employment and afterwards. Some of our future is automatically purchased for us by our contributions to the US Social Security system. But it isn’t nearly enough. It takes thought and a bit of effort to outline and fully fund the lifestyle you want. Yet the cost of not doing so may be greater than you currently imagine.
Take, for example, a consultant approaching the age of 70 who lives in the Bay Area and who is used to earning around $500,000 annually, spending most of his after-tax earnings. He and his wife own a home, but still have a mortgage. They have saved around $800,000 in retirement accounts but have only modest non-retirement savings. They love to travel internationally, living large, and take pleasure and pride in helping their grown children financially. They love their lifestyle, and now they want to retire.
There are, indeed, many options available to them – but virtually none that do not require that they make significant changes to their lives, given their current spending and asset base. Yet the thought of making big changes now flies in the face of everything they are and want to continue to be. They are hurt, and angry, and somewhat disbelieving.
This couple had every opportunity to “buy” the lifestyle they love. And if they had started 20 years ago – or even 10 – it wouldn’t have been such a stretch.
The Future Eventually Arrives
When you’re young, your biggest assets are time and your career (earnings). But if you spend every penny you earn on your now – if you fail to think about your future – you’re squandering both. Over time, with a little effort, you can transform the assets of your youth, time and career potential, into financial assets. And when you choose, those financial assets can sustain you. If done right, it doesn’t have to hurt. You really can have it both ways: happy now and happy in the future.
Bear in mind, however, that thinking about your (financial) future is as much of an emotional journey as it is an intellectual one. And it’s a journey that is best done with a trusted guide. So call us if you’d like to talk about making your financial future possible.