In an ideal world, people would begin trying to find a financial planner as soon as they had an income. More often, people come to financial planning because of a concern. The most common concern that drives people to financial planning is their fear of running out of money in retirement. So often the question posed at the beginning of the process is, “Will I have enough?” But for some, research demonstrates, “Will I have enough?” is not the most important question. For some, the more important question is, “Will I spend enough?”
In their book, Willpower: Rediscovering the Greatest Human Strength, Roy F. Baumeister and John Tierney briefly examine the findings of some behavioral economists that have found that “neurotic penny-pinching may be even more prevalent than neurotic overspending.” They write:
“The result is a condition that researches call hyperopia (the opposite of myopia) in which you focus too much on the future at the expense of the present. Such penny-pinching can waste time, alienate friends, drive your family crazy, and make you miserable. The studies show that tightwads aren’t any happier than spendthrifts, and that they suffer a case of saver’s remorse when they look back on all the opportunities they passed up. When the time comes for the final monitoring, when you’re adding up not just your assets but your life, you don’t want to rediscover the old proverb about there being no pockets in shrouds…”
Financial planning does not just test scenarios to ensure financial stability in retirement for those concerned about running out of money. It also finds optimal spending rates for those who justifiably have no concerns about overspending, but are not enjoying their resources as much as they could. By proving that spending more does not adversely affect the future, some clients have become more comfortable spending on themselves. This does not usually occur overnight or even in the first year of meetings. However, as clients test the waters of spending a little bit more than they are accustomed to, they can learn to feel comfortable committing more of their resources to the present.