We’ve been talking about working with clients who have ideas about money that may not necessarily be helping them achieve their financial or other life goals. In the first part of this discussion, we talked about those clients who have trouble saving money and discussed some ways you can help them change their mindset. In part two, I want to talk about the opposite issue: those clients who have trouble spending money.
At first glance, this might not seem like a problem at all. After all, if your clients tend to save all their money, they’re well on their way to a happy and secure retirement, right? Well, what I’ve noticed is that, most of the time, this is the wrong impression. As a fiduciary in an advice-based planning practice, it’s my job to not just focus on the money. Will these types of clients be financially set for retirement? Probably. But at what cost?
Those who hold onto money to an unhealthy degree usually have one or two negative beliefs about wealth: either that they don’t deserve it (and therefore shouldn’t spend it) or that they’re going to lose it. This often goes back to their childhoods. It’s common for children of those who endured the Great Depression to believe that hoarding money is the only way to protect against poverty and ruin. It’s also common for those whose parents were poor to believe that money is the root of all evil and, if they’ve been fortunate enough to acquire wealth, think spending it will equate to doing something ‘bad’.
These folks never get to enjoy the money they’ve worked hard to earn and their beliefs usually end up negatively impacting their relationships as well. If they’re not careful, their false beliefs about money will then transfer to their children and the cycle starts all over again. Do you have clients who fit this category? Here are some ways to mentor them:
For Those Who Have Trouble Spending
Help them see the value of time Many people who have trouble spending money are focused on it buying ‘things’. When they hear ‘spend’, they think of fancy cars, mansions, expensive clothes, and other items that they deem to be wasteful. It’s important to show them that money can also buy time. Would they be able to develop fulfilling hobbies if they paid someone to clean the house or bring healthy meals into the home and free up their time? Would they gain the time to create more memories with their family if they spent money on a nice vacation? Once you take the focus off ‘things’ and put it on ‘time’, you may just see a shift in their mindset.
Remove the ‘good’ and ‘bad’ stigma Money is not inherently ‘good’ or ‘bad’ no matter what your clients may think. It’s all about the emotions they attach to it and what they use it for. Try to challenge them to come up with a list of things they could do with their money that would help others. Buy the groceries for the single mom in front of them in line at the store? Hire some in-home help for an ailing grandparent? Showing them all the good they can do with their wealth is often the emotional switch they need to flip to view money in a positive light.
Show them that money can buy happiness We’ve all heard the old chestnut ‘money can’t buy happiness’. While it’s certainly true that you can still be a miserable person with millions of dollars in the bank, the truth is, money can help you have a more fulfilled and satisfying life. Help your clients see that when they spend money, they aren’t compensating for something. Instead, they are adding value to their lives and those around them. Encourage them to spend money on others or use it to enhance their wellness or education. Once they see that money can lead to happier experiences if spent correctly, your clients may start to adjust their attitudes.
It’s our jobs as advisors and mentors to address the emotional side of investing with our clients and this is especially true when we realize a client has unhealthy beliefs about money. If you have clients who have trouble saving or spending, take some time to understand what’s behind those beliefs so you can give them the best possible advice.
Want to talk more about the emotional side of wealth? Reach out to me or visit our website. I’d love to connect with you.