Ready For Retirement
Ready For Retirement
One Simple Tip to Make Spending Easy in Retirement
One of the biggest ironies in retirement is that the people who save and invest the most often struggle the most with actually spending their money in retirement. In this video, I’ll walk you through a simple framework to make spending easier—without guilt or second-guessing.
I’ll share a compelling client story, a personal experience, and actionable steps you can take to shift your mindset and enjoy the retirement you’ve worked so hard for. If you’ve ever hesitated to spend on things you value, even when you can afford to, this is for you.
We’ll cover:
- Why our money habits from the past shape how we spend (or don’t spend) today
- A five-step process to help you feel comfortable spending in retirement
- A practical tip that makes it easier to say “yes” to the things that truly matter
🎯 Don't let a scarcity mindset hold you back—start living your best retirement!
Questions answered:
1. Why do some retirees struggle to spend money, even when they have more than enough saved?
2. How can retirees overcome a lifetime of saving habits and confidently spend on things they truly value?
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Timestamps:
0:00 - A pertinent story
3:24 - A personal story
5:10 - Steps 1& 2—acknowledge and evaluate
7:05 - Steps 4 & 5—Identify values and make it easy
9:44 - Healthy tension
12:30 - Step 5—Withdrawal and set aside
14:49 - Wrap-up
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One of the great ironies of retirement planning is that oftentimes the people that have saved the most and invested the most for retirement are those same people that have the most struggle when it comes to spending money in retirement. So in today's video, I'm going to walk you through a simple framework that makes spending money in retirement easier, and I'm going to do so by sharing a client story, a personal story, and then some steps you can take to make this process easier. This is another episode of Ready for Retirement. I'm your host, james Canole, and I'm here to teach you how to get the most out of life with your money. And now on to the episode.
Speaker 1:There's one story that always comes to mind when I hear people talk about their challenges when it comes to spending money in retirement. This story goes back a couple of years. I just started meeting with a couple of new clients. The husband was successful, had a business sold a business. Wife was successful, had a business, sold a business. Wonderful people, great portfolio, great position to support all their goals that they had in retirement. We started working together and we started writing some projections and saying, based upon the portfolio that you have, what can you support when it comes to your retirement. We ran through their projections and saw they could support a very comfortable retirement and even then have a whole lot of money left over at the end of retirement than they had going into retirement. In other words, we started solving for how much more money could you spend before you actually start running the risk of truly outliving your money? And as we ran these projections, we started showing them they could spend an additional six figures per year for the rest of their retirement and still be in a great position to not outlive their money. So we walked away from this meeting and they were excited. They saw this. This was eye-opening and they thought that they were just going to start living and they were living a comfortable lifestyle. But they saw this and I think what was going through their mind is oh my goodness, it's going to be easy now to go spend. It's going to be easy to understand that we can spend and will spend more now that we know we can spend more. So that was the thought process that rationally understanding we can do this makes it so that we will go do it and it will be easy to do so.
Speaker 1:So we had that meeting and maybe a week or so later they were actually in town. So I'm down in San Diego. They were in town visiting and we got together for lunch and I'll always remember at lunch a story that they told me they were visiting here in San Diego. They had gone out to a nice dinner and they got back to their hotel room. When they got back to the hotel room the husband was thinking you know what? I actually want something for dessert.
Speaker 1:And he went over to the little mini bar in the hotel and he saw a bag of M&M's and that bag of M&M's and that bag of M&M's sounded delicious to him. So he went to grab that bag. But then he read the menu right next to it that said M&M's $5. And he saw that and he thought why on earth would I pay $5 for this bag of M&M's? And instead of taking that and saying you know what James just showed us and modeled out for us that we could spend way more money than we're actually spending and still be completely fine for the rest of our retirement Instead of that he put that bag down, walked down the street a few blocks to a 7-Eleven where he could purchase that bag of M&Ms for a couple bucks and then walked back and it was just this interesting story where he said, james, you had just finished showing us how much more we could spend. And then this simple bag of M&Ms that I really wanted that moment, instead of just spending the $5, because in the grand scheme of things, that's absolutely nothing based on the financial position that we're in I went and took a very long about way to get that same bag of M&Ms to save a couple bucks. So why is that? Why is it? There's a disconnect between we can look at our portfolio, know what we can spend, but then we have so much trouble actually doing so. So we're going to walk through a simple framework, a simple process. If that's you, if that story resonates, what can you do to make spending actually pretty simple? And, by the way, I think everyone has this type of a story.
Speaker 1:I remember as a kid. So I grew up. My dad was a pastor. I was the oldest of four. My mom worked some jobs here and there, but was mostly staying home to take care of kids. Money was very tight and so that was the mindset that, as a child, was ingrained in me. My parents were incredibly hard workers. This had nothing to do with working hard or not working hard. It just had to do with the reality of the financial situation, which is there wasn't much money. And so you develop this somewhat of a scarcity mindset or the savings mindset that we have to preserve what we have because what we have is scarce.
Speaker 1:I then grew up a little bit and my friends and I in high school we all loved the San Diego Padres and we would drive down to Padres games every once in a while. And I remember back then when we would do that. Parking was $5 to get paid, parking next to the stadium. But instead of paying that $5, we would drive around the stadium for 30 minutes, 40 minutes, 50 minutes sometimes, looking for a free place to park. We'd park half a mile away, a full mile away, doing anything we could to save that $5. Now that's a relatively simple thing. But why do I share that? I share that because in that moment that mindset served me. That mindset helped me. Money wasn't incredibly abundant, so you needed to do what you needed to do to save that money.
Speaker 1:But as I've gotten older I've had to ask myself does that same mindset still serve me? I still will get off the freeway, sometimes off the 163 going into downtown San Diego. Still a mile out away from the stadium, in my mind a subconscious starts looking for parking spaces, of understanding where is that free parking? What are the parking lots that tend to be less expensive than if we park right next to the stadium? But here's the difference. As a teenager, as I mentioned, that was a helpful mindset. Money wasn't abundant, so it's important to do those little things to save a dollar here or a dollar there.
Speaker 1:As I've gotten older and as I'm in a different financial situation, I still have that same mindset. I still have some of those same thoughts. So I think the first step, as we talk about a process to make it easier to spend money in retirement, is to acknowledge that feeling, acknowledge those thoughts that come up. I still have that same thought driving into San Diego, even if I'm not going to a Padres game. It's just a subconscious part of the operating system that was developed at a certain period of my life that no longer serves me, no longer helps me. So the first step is to acknowledge that I can drive in and say okay, I see that. I feel that I recognize what my brain is thinking. But step two is to say, is that helpful or is that unhelpful? When I was a teenager, that was helpful. That mindset, that thought process. It was helping me to save money.
Speaker 1:My guess is, for those of you who are struggling to spend money in retirement, there's some point in your life where your operating system, the way in which you make decisions, was developed based upon some type of a money experience probably a money experience based upon scarcity or a lack of money or some financial hardship that you went through. Those experiences, whether we know it or not, whether we're conscious of it or not, are the things that are shaping the way that we view money. Those things don't just go away overnight, even once your portfolio balance and your income level increases, even if it increases quite dramatically, like it had for my client. So that's the second step Once you recognize the feeling, feel that, acknowledge it, know that it's there. Step number two is saying is this serving me or is this not? It might be and, as I mentioned, as a teenager that absolutely was helping me. Now, as I'm older, if I'm driving down to a Padres game and if I bring my wife and two kids, that thought process is not going to serve me Wasting time trying to find parking a mile away so I could then walk a mile with a three year old, a seven month old and my wife. That's probably not the best way to save a few bucks. Now, today, parking is going to be more than $5, but even if it's $20, $30, $40, I can recognize the fact that that thought process, that desire to save money, is not serving me in that situation. So that's step number two.
Speaker 1:Step number three is to simply ask yourself what do you want to spend money on? And maybe a better way of even thinking about that is take the money out of it. Ask yourself what do you value? What's important to you? Is it those experiences at the Padres games? Is it your health? Is it a hobby? Is it travel? Is it adventure? What are the things that are important to you? So take money out and identify that Could be charitable giving. It could be travel, as I mentioned. It could be doing different things with different people. I mentioned it could be doing different things with different people, but start with that. So it's that simple. Step number three is identify the things that are meaningful to you and do it when you're in a rational state of mind, not the emotional state of mind, like I might be when I'm trying to find parking, like I might be when it's easier to say I'm not going to valet because it's easier to go, spend 20 minutes finding a parking spot and then walking to the restaurant.
Speaker 1:Step number four, then, is to create a system that makes saying yes to those things that you value easy. For example, let's say, health is something that's important to you. Identify that. Step number two how do you make it easy to pursue that? Well, maybe you go sign up for personal training lessons at the local health club. Maybe you get a nice gem, maybe you get something that you wouldn't otherwise feel comfortable spending money on, but by by paying for those lessons, it's going to commit to you going to that. There's going to be a forcing mechanism that's going to keep you committed to that because you've paid for it, because you've identified it in advance.
Speaker 1:Or maybe fun is something that's important to you, but you can't bring yourself to go out and spend that money on a nice dinner. You can't bring yourself to go spend money on the activities that you see other people spending money on. Well, what if you started hanging out more with the friends that do those types of things. Maybe you have friends. On every Wednesday night they go to dinner and a movie. You might not be able to bring yourself to do that if you had to make the decision every single week to do that on your own, but if you surround yourself with those friends that are doing the types of things that you want to do, it becomes easier. There's going to be that healthy peer pressure that moves you closer to doing the things that you want to do. So you're not relying on your own discipline. As odd as it is to say that spending is a discipline, it can be. You don't want to have to rely upon that.
Speaker 1:Rely upon the system that says I'm going to create an environment that makes it easier to do the things I want to do. In this case, the environment is the friends. These friends are already doing fun things going out to these types of a dinner. Spend more time with them. Now be careful with this, because if you say you know what? I don't enjoy golfing, but you start hanging out with your golf friends and now, all of a sudden, that peer pressure is taking you to the golf course and you're spending all this money on something you don't even like doing that's just wasteful. You're not going to feel good about it, so don't spend money. Don't create systems that make it easy to say yes to things you don't enjoy doing, but make it very easy to say yes to the things you do want to enjoy doing, the things you do want to align your spending with.
Speaker 1:For me personally, this system if we want to call it that is my spouse. My spouse's name is Ashlyn and I remember when we got married she was a very good saver, but I think that when we did get married she recognized the fact that, okay, james is kind of the money guy. James is also naturally a saver, so she felt less pressure to carry that by herself and she felt a little bit more free to spend. Now I'm actually grateful for that because, left to my own devices, my tendency would be to save, would be to invest, would be to say no to certain things and instead save that money, defer that money for other things. Her tendency, and what she's helped me to do, would now be to say, well, no, let's take that other trip, let's go to dinner and get the appetizer and the dessert which would have been unheard of when I was growing up or before I got married, that just wasn't something that I did.
Speaker 1:So there's this healthy tension of I didn't have to have the discipline to make these decisions to spend and again backing up, big picture very different financial situation now versus earlier in my life or even as a young adult. So that, of course, should be a given. Don't start spending more if you're not in a good financial position to do so. But what I'm specifically talking to is those people that are in a good financial position and still struggle to spend money in retirement. But for me, that was a system.
Speaker 1:There was this healthy tension of, okay, I could sit back and objectively say you know what does getting an appetizer and a dessert when we go out for dinner? Is that adding to the experience we're going to have together? The answer in many cases is yes. So when I look at the extra money required to do that and think, okay, well, what's the alternative? That's something that I'm glad about. In this situation my wife helps me to do more of. When it comes to taking trips, I am glad my wife pushes for more trips and more experiences on those trips that I would not have felt comfortable spending money on earlier in life.
Speaker 1:But now there's this forcing mechanism, now there's this system that I don't have to make these decisions on a one-off basis. We have this healthy tension in both directions, and so that can be your spouse, that can be a friend group, that can be your spouse, that can be a friend group, that can be anything. But the more you have a system to help making spending money on the right things easier, the better off you're going to be, because, if it just comes down to do, you have the willpower to make these one-off decisions here and there and everywhere. That willpower is probably not going to last. You're probably going to revert back to, or default back to, that tendency that you have, which is to not spend money and save it instead. So those first four steps are almost like the structural things that you need to do. When you have those feelings, it's difficult to spend. Acknowledge it, number one. Number two is ask yourself is this still serving me, or is this no longer serving me because I'm in a different financial position and I now value things differently? Number three identify what do you actually value, what do you want to spend money on? And then, number four create some type of a system that makes spending in those areas easier, so you're not having to rely upon willpower. Step number five is more of a tactical thing.
Speaker 1:I did a podcast episode several months back now and I invited a guest on named Ben, and Ben shared his experience where he actually retired early in 2017. And he had waited to retire until he hit his retirement number. And then he hit it and he retired, but he was terrified to actually spend money and he actually shared how, from 2017 until the time that we're talking, his portfolio had more than doubled, but he wasn't spending any more money. That mindset didn't change, even as his net worth in his portfolio increased by a significant amount. So he shared a very simple tip that he found actually started to work for him, and I thought this tip was genius. He said that what he now does at the beginning of each year is he identifies the things that he does want to spend money on and he pulls that money out of his portfolio on the first of the year and sets it aside in a separate account, a separate bank account. So let's assume travel, for example. Maybe he's identified that he wants to spend $25,000 this next year on travel. What Ben does now is he takes that $25,000 out in January, puts it in a travel bank account because in his mind that money is now already spent.
Speaker 1:When it comes time to take the trip, it's just a matter of transferring the funds that have already mentally been spent. The beauty of this is, if Ben were to wait until he actually took his trip to pull money out of the portfolio, that's the thing that hurts. That's the thing that feels unnatural. We're so used to putting money into our portfolio that taking it out is actually where the pain comes into play. So he's hacked his system where he's saying I'm not going to have to experience that pain multiple times throughout the year because chances are I'm just going to avoid it. If it comes time to take a trip and I haven't actually pulled that money in my portfolio yet, I'm somehow going to convince myself not to take the trip because that money is better off in my portfolio. But if I take it out ahead of time, my mind thinks that money is already spent and all that's left is actually transfer it to pay for the trip when that trip comes. So I thought this was a beautiful tip.
Speaker 1:One of the best things that you can do is, at the beginning of the year, look out for the next 12 months. This doesn't have to be a yearly thing, but at some regular interval say what do I value, what do I want to spend money on, estimate what those things might cost, and then pull that money out of your portfolio as if you've already spent it, right then and there Put that in a savings account and then it's not going to be as difficult to actually spend that money when the time comes in retirement. So, as we start to wrap this up, if this is you, if you're that person that has done well but struggles to actually spend money in retirement, first thing is to recognize that that's a very common thing. You are where you are because you are who you are and that's not going to magically change overnight. You, that person whose identity is that of a saver, that's not automatically going to change overnight just because you want to be able to spend money a bit more freely. That's where it's important to follow this process.
Speaker 1:When you do have those feelings like it's difficult to spend, recognize that In my case, I still have those feelings when it goes time to pay for parking or to pay to valet a car. Those feelings, as a teenager, come up of. Ah, I could just go park further away and walk. But what I can do is I can recognize step number two that that feeling is no longer helpful. That feeling is no longer serving the intended purpose I have with my money today. What you then do is understand what things do you value? How can you create a system to spend money on those things? And then the practical tip is to set money aside early on so that you simply have to transfer that money to pay for the thing later, as opposed to having to pull it from your portfolio. So I hope that was helpful.
Speaker 1:If you haven't done so already, please make sure that you subscribe to this channel to get more content like this. Also, a relatively new announcement we have a retirement community where people like you can talk about their struggles with things like this, to talk about helpful tips and tricks. If you are interested in that, this community is completely free. There's a link in the show notes to where you can get access to the community. It's called the Root Collective. Check it out, join there, join the discussion with other people just like you.
Speaker 1:Knowledge. No other conflicts of interest exist regarding these testimonials and endorsements. Hey, everyone, it's me again for the disclaimer. Please be smart about this. Before doing anything, please be sure to consult with your tax planner or financial planner. Nothing in this podcast should be construed as investment, tax, legal or other financial advice. It is for informational purposes only. Thank you for listening to another episode of the Ready for Retirement podcast. If you want to see how Root Financial can help you implement the techniques I discussed in this podcast, then go to rootfinancialpartnerscom and click start here, where you can schedule a call with one of our advisors. We work with clients all over the country and we love the opportunity to speak with you about your goals and how we might be able to help. And please remember, nothing we discuss in this podcast is intended to serve as advice. You should always consult a financial, legal or tax professional who's familiar with your unique circumstances before making any financial decisions.
