Upticks: How to Spend Your Money
By Jake Falcon on January 6, 2022
So many wealth advisors talk about how to save your money, but they don’t often discuss how to spend your money. Falcon Wealth Advisors Co-Founder and COO Cory Bittner, CRPC, recently joined Jake on Upticks to discuss how both retired people and people who are still working should think about spending money.
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So many wealth advisors, including our team here at Falcon Wealth Advisors, talk about how to save your money. But they don’t often discuss how to spend your money. Falcon Wealth Advisors Co-Founder and COO Cory Bittner, CRPC, recently joined me on Upticks to discuss how both retired people and people who are still working should think about spending money.
Jake: Cory, I’ve noticed that many clients whose parents grew up in the Great Depression have specific attitudes towards debt, savings and spending. They were brought up to believe that mortgages and all other debt should be avoided and that you need a large amount of savings in the bank.
Cory: Yes, I’ve of course noticed that too. It’s interesting that a calamitous event from nearly a century ago still impacts so many today. Our biases towards money are formed at a young age and can be difficult to change.
Jake: Yes, and one of our goals at Falcon Wealth Advisors is to increase financial literacy and change how people view money. I believe far too many people are living with financial anxiety for no reason.
So let’s first talk about people who are still working. If you’re working, it’s obviously critical that you save and invest a percentage of your income in the right vehicles and in the most tax efficient manner. At Falcon Wealth Advisors, our team of financial planners uses their tools to determine exactly how much you should save in your 401(k), Roth IRA, emergency savings account and other accounts.
Once these savings goals are listed in your financial plan, you should be able to experience what we call “guilt free spending.” For example, if you bring home $10,000 a month, and we’ve determined you should save $2,000 a month, and your mortgage and other bills and debts equal $4,000 a month, that leaves you with an additional $4,000. I believe you should have no guilt about how you spend that $4,000 a month – you’ve hit your savings goals and your obligations are taken care of, so this is yours to spend how you see fit. Golf, a daily drink at your favorite coffee shop, travel, designer clothes – go for it!
As much as I reinforce this with clients, some still experience guilt when they spend that remaining money each month. I believe this spending should be guilt free, and if you can get to a place where you view it that way, it can be a very freeing feeling.
Cory: Yes, I recently spoke with clients who felt guilt after pulling money out of a retirement account to help their daughter and her family buy their first house – even though their financial plan allowed for spending this money and is still in strong shape.
Jake: What advice did you give them?
Cory: I told them that they worked and saved diligently for decades so that they could spend the way they wanted to. And I reminded them they will get a lot of joy from helping their daughter and son-in-law. I also told them since their daughter is their primary beneficiary anyway, it makes sense to help her today, as the assistance will likely be more impactful now than in a few decades.
Jake: Hopefully us building a financial plan for these clients helped ease their anxiety, as they can look at the plan and see it supports helping their daughter and her family.
Cory: Yes, and their story is a good example of matching your spending with what’s important to you.
Jake: Let’s now talk about how retirees spend money, as about half of our clients are retired and most people want to retire someday. In my experience, retirees experience a whole different level of anxiety when spending money. Retirees no longer bring home income from a job, but many receive social security benefits, retirement distributions, and pension payments.
Because they’re no longer actively employed, for the first time in their adult lives, most retirees aren’t setting aside money to save. After saving for decades, many of our clients find it hard to wrap their arms around the idea of not only not saving, but withdrawing money from their retirement accounts.
I think this is when the value we bring to our clients gets turbocharged. We show them their financial plan’s projections and even the projected income from their investments. I can reiterate to clients that based on their investments, they will bring in tens of thousands of dollars a year in dividends and interest. I discuss how a combination of this, social security and a potential pension is usually more than enough to sustain their lifestyle.
It’s key to make sure the financial plan’s trajectory is reflective of a client’s current spending, and that’s something we do every time we review a financial plan. We can easily tell you if you’re overspending or underspending. And I’m proud we now have four financial planners on our team at Falcon Wealth Advisors.
We’ve found some people overspend early in retirement, as they’re traveling and doing all the things they dreamed about. The good news is people spend less as they get older and slow down. We are able to reflect this in your financial plan, allowing you to embrace the “Go-Go Years” of your 50s, 60s and/or 70s. We encourage clients to spend their money and enjoy their lives in these early years of retirement and slow down their spending in later years – this can lead to a sustainable retirement.
Cory: Jake, a question people who want to retire in the very near term will appreciate. If a person knows how much money they have coming in but aren’t sure how much they spend, what advice do you have for them?
Jake: Well I think the first thing we should look at is their income and debts. If a client has credit card debt, I’m going to project a higher monthly spending amount in retirement. We also look at car payments, mortgages, and other obligations. We often slightly overestimate how much money clients will need in retirement, just to be safe.
I’m proud we have a tool at Falcon Wealth Advisors that can link to credit cards and other financial accounts from clients, providing them with charts and graphs showing exactly how much they spend and how it impacts their financial plan. They can see how much they spend on everything from groceries to entertainment.
Cory: I actually started using this tool myself! It’s so much easier and better than tracking my expenses in a spreadsheet. It’s eye opening to see how much you spend on certain purchases each month.
Jake: Yes, I’ve done it and learned I spend way too much money on golf. But, I have all my savings automated and I’m reaching the savings goals in my financial plan. So what I spend on golf, one of my passions in life, is guilt-free spending (although I feel a little bad golf way more expensive than my wife’s hobbies and passions).
Cory: Yes, and I respect that you spend money on what you value, Jake. Your iPhone is really old but it’s not something you value – so you spend your money on golf instead. I think that’s great.
Jake: To conclude this discussion, I want to note Falcon Wealth Advisors has helped hundreds of people retire successfully. That’s why clients come to us and it’s why I’m proud of the work we do.
Cory: Yes, and there’s nothing better than a client telling us how well things have been financially in their first five or 10 years of retirement. When they tell me they feel they’re on track or even ahead of where they expected to be, that’s about the most rewarding feeling we can have.
Jake: That’s great feedback, Cory. As our clients know, we value all feedback.
If you want to learn how to get more satisfaction and enjoyment from your spending, whether you’re retired or still working, you can contact me directly at Jake@falconwealthadvisors.com.
Clients choose to work with us to enhance their financial literacy and explain exactly what their financial plan means to them.
-Jake Falcon, CRPC®
