9th Jun 2018
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Do you have your retirement tribe’s spending profile?
Author: Olga Galacho
The reason why you can’t save

Yesterday, Wealth Mentor Jackson Millan revealed the reasons why some people’s spending styles hold them back from accumulating substantial savings.

Today, he explains why members of the different YourLifeChoices retirement tribes might struggle to save if they fit into the spender profiles that he identified.

“Everyone knows they should budget, but they don’t know why they should budget,” Mr Millan told YourLifeChoices.

“Those about to retire or in early retirement must come to grips with what their lifestyle costs now and whether they expect this reality to continue for their foreseeable future.”

The different spending personalities Mr Millan uses to illustrate how his clients can repair their savings strategy are: the Cash Stasher, Cash Splasher, Cash Makes Me Happier, Chicken Little Investor, Points Accumulator, the Ignorer and the Midas.

After cross-referencing these spending styles with the YLC retirement tribes, this is Mr Millan’s conclusion on what holds people back from saving more money:

Affluent retirees – Cash Splashers in this tribe are comfortable to spend up big because of their substantial nest eggs. They enjoy retail therapy but they do not plan for big expenses, such as a holiday or a new car. When they haven’t factored their penchant for big ticket items into their plan, they can become unstuck later in retirement, especially if they experience a major medical headache.

This tribe may also display the Midas personality where they believe they will never run out of money. This type of weakness can lead to a nasty surprise the day their credit card is rejected at the terminal. No matter how wealthy you are, a spending plan is vital to avoid running out of money.

Constrained retirees – some people in this tribe can also be guilty of being Cash Splashers. Perhaps early in their retirement they will use up a significant part of their savings without paying attention to future financial considerations. Sometimes they will suffer from the Chicken Little complex, where they are too afraid to invest and believe that there will always be just enough money to meet their needs; when, as is often the case, an unexpected major expense crops up later in life and they find they do not have the means to pay for it.

Cash-strapped retirees – this group is definitely susceptible to the Chicken Little mentality. They may believe they do not have enough resources to make an extra quid, or perhaps they were burned by the Global Financial Crisis eating away at their savings. They become risk averse out of fear that they will lose everything again. This tribe has little faith that they can save and as such, may slip into becoming Ignorers.

Ignorers avoid opening bills, and often accumulate more debt by paying one credit card balance with another credit card. They ignore their financial situation and instead distract themselves so they don’t have to think too hard about money. The reality that they don’t have much of a cash-flow is too daunting to contemplate.

Mr Millan believes anyone can change their spending personality by following an easy process: essentially, if you don’t measure how you splash your cash, you will not see it. So he asks clients to become their own spending detectives.

“I encourage all my clients to do a personal profit and loss (P&L) statement to familiarise themselves with their spending habits and guide them to be able to afford the lifestyle they want in retirement,” he says.

“A P&L needs to document all the incomings and outgoings, and hopefully produce a bottom line that is in surplus.

“For instance, I have a client who is on an allocated pension and draws $1000 a week to live on. His expenses come to just $900, so he has a margin of $100, which he can return to his savings if he wishes.

“However, if that client had $1100 worth of expenses on a regular basis each week, then his budget would be in deficit to the tune of $100 each time.

“In this scenario, I get them to understand the long-term implications of not balancing the P&L. Unless they want to cut back on spending, I advise them to look for additional income, such as one day of paid work.”

Ensuring that savings last in retirement means looking ahead at potential future scenarios. Mr Millan says he guides his clients’ planning process by insisting they ask themselves three questions:

  • What is fundamentally important to you?
  • What are your goals, dreams and aspirations?
  • What is the significance of these goals, dreams and aspirations to you?

With detailed answers to these questions, Mr Millan says drawing up a plan becomes easier and the journey to accumulating savings for a rainy day is off to a good start.

Mr Millan is the author of Enjoy the Journey: Creating Wealth and Living the Life You Desire.

Are you aware of any bad spending habits that you would like to change? Do you know exactly where your money goes each week?

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    COMMENTS

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    patti
    13th Jun 2018
    10:38am
    My mother always told me to "cut your coat according to your cloth." In other words, don't go into debt, if you can't pay for it then you can't afford it. I only use credit for emergencies. Despite the constraints of age pension being my only income, I manage well. As long as a major repair bill doesn't come my way
    Triss
    13th Jun 2018
    1:05pm
    That was one of my mother's sayings as well, patti.
    JB
    13th Jun 2018
    2:22pm
    Think our mothers were very wise people . They had seen it all and still survived . I still think of my mother so often and her financial quotes !
    Hasbeen
    13th Jun 2018
    3:17pm
    So true Patti, & so easy if we use our common sense.

    I have never had, or will have a credit card. Last borrowed money to buy a new car in 1962. I haven't wanted another new car, or to borrow money since.I did have a bridging loan to buy this place 26 years ago, but only for the 3 months it took to sell & finalise the old place.

    I have really enjoyed spending the thousands I've saved in interest, on things I really want.

    About a dozen years back my wife really wanted a NEW car. I thought OK, as like a lot of us she had not had many NEW things in her life, & we could pay cash, saving a fortune in interest. Just over 4 years later she was quite upset to realise her NEW car was worth about 30% of what we'd paid for it. In fact it was worth quite a bit less than my 1980 model car bought for peanuts a few years earlier, which had quadrupled in value.

    After a number of late model used cars since, she now wants to by a 1976 model classic similar mine, from an acquaintance who is handing in his licence. It is in great condition, & a beautiful car. It will cost about the same as a modern hatch, but unlike them, it's value goes up a little each year.

    More than one way to skin a cat.
    Magic Touch
    13th Jun 2018
    3:29pm
    Like my mum said that you dont had that big head dont wear that big hat, it means that if you dont had that much money than dont spend for it. Always make sure you have that enough money only you can go for it.
    GrayComputing
    13th Jun 2018
    12:04pm
    It is time for all of us to rant at our MPs and Senators daily to take action for human decency and a huge stress reduction for pensioners

    NO ASSET TEST FOR A PENSION EVER AGAIN!
    A pension is not welfare.

    Most economist say we will save taxpayers money by dropping asset testing because of the massive overheads cost in running Centrelink and the 10,000 conflicting rules.

    Hiring more Centrelink staff will only increase taxpayer’s costs for processing the creeping insane red tape monster system politicians and well paid bureaucrats have created.

    Help scrap it now. Become a hero.

    Even poorer New Zealand has a NO ASSET pension so it is cheaper and user friendly.

    Why worry that few million$ earners get it too. That is peanuts to them, not enough for a good vintage champagne.

    Do retired and retiring people really look forward and want 100++ visits to/from Centrelink and be part of 3 million waiting queues and lost calls?

    Does your MP really like being part of the system that allows this indirect abuse of the elderly?

    This abuse is actually sponsored by our government and forced down to Centrelink and borders on a criminal act.

    Why do MPs normally compassionate persons let this Centrelink abuse happen at taxpayers’ expense?

    Some opposition and independent MPs stand to lose their chance at being part of the needed government changes

    We all need to tell our MP and senators every day that these criminal asset tests for a pension must be dropped now.

    Also contact opposition and independent MPs who can help us to get a fair deal on pensions

    NO ASSET TEST FOR A PENSION EVER AGAIN!
    Anonymous
    13th Jun 2018
    12:23pm
    GrayComputing - this is repetitious and boring. Can you please find another party trick, dumbo!
    Triss
    13th Jun 2018
    1:07pm
    Sometimes, Bid Al, things have to be said a number of times before they enter people's conscious and unconscious minds.
    Keep pushing, GrayComputing.
    Hasbeen
    13th Jun 2018
    2:37pm
    What a great idea.

    We could pay all those 10s of thousands of retired bureaucrats the standard pension as well as the obscenely generous pension they receive now, courtesy of the tax payer.

    And of course don't forget all those ex members of some parliament, they are probably struggling on their parliamentary scheme. Then those retired bank executives, after only earning a few million a year probably need help now. How can we be so mean as to not give these deserving folk our help?
    George
    14th Jun 2018
    12:00am
    It's a highly relevant message for this audience, GrayComputing, and I encourage you to keep posting it. The more people who read it and act on it, by pushing their MPs, the better. Ignore the foolish objectors.

    In fact, I would go further and reiterate that the current Broken System is beyond repair. The only solution is to have Universal Pension should be paid to all who are of Age 65 and have Residency of 15 years - with NO Centrelink involvement. A lesser benefit can be worked out for those who don't qualify based on their individual circumstances.
    Then all can do better (save / invest) over and above that and pay taxes on the extra earnings. All tests should be scrapped, with all Special Pensions (especially the large, untested, unfunded ones for Politicians) should be scrapped with all to fall under the same rules.
    Mad as hell
    14th Jun 2018
    6:58am
    GreyComputing keep your message going. Shout it from the rooftops “we’re mad as hell and we’re not going to take it any more.”
    KB
    13th Jun 2018
    1:07pm
    Always better to save for an item than putting the item on a credit card. Credit cards should only be used for extreme emergencies, Lay by is the best and free option if you really want to buy something that you want or need
    Kathleen
    13th Jun 2018
    3:21pm
    Everything of ours goes on the credit card and then gets paid without incurring any interest. It tracks spending and helps budgeting. It also gives 55 days interest free from the first purchase.
    I guess if you can’t trust yourself then it is a bad idea but otherwise it is very useful. We always have a receipt even months and years later to look back on. Direct stuff goes there too like fortnightly water, power, health cover, etc. we can see it and it works for us.
    Anonymous
    13th Jun 2018
    4:13pm
    Kathleen, I have been doing this since the days when Ansett was still going; and by doing so, I earned frequent flier points as well. I had several 'free' plane trips as a result. Now I get points attached to my credit card useage that I can redeem for a voucher from say a department store. So I am with you - if you can be disciplined enough to ensure you pay your balance off in full by due date, it is a great way of money management.
    Kathleen
    13th Jun 2018
    5:23pm
    Yes, big Al, we get flybuys and free delivery from Coles. Every little thing helps for sure!
    Sundays
    13th Jun 2018
    1:55pm
    It is important to have a budget and stick to it. However, there is a balance between saving in case of expenditure in the future or spending on things like holidays when you’re still young enough to enjoy them. Be good to know how to get this right
    Cheezil61
    13th Jun 2018
    8:12pm
    Yes can guarentee as soon as I think I have $1000 saved up to go for a cheap holiday something major will break down (that there's never enough money in the budget for)! Heartbreak Hotel!
    Kathleen
    13th Jun 2018
    3:29pm
    $900 for expenditure a week, what on earth is this person doing with his/her money? Restaurant meals? Expensive wine?
    I guess people live up or down to their income/means?
    Anonymous
    13th Jun 2018
    11:30pm
    His wife probably spends $500 and the guy pays the rates , insurance , car ergo and maintenance , health insurance etc with the balance
    Kathleen
    14th Jun 2018
    1:36pm
    Let’s make up some more twisted tales because you could make up any story to fit your bias and prejudice.
    He drinks it all and beats up his wife lol for another twisted version!
    They both go to the pokies every day for another one lol!
    Dinner out every night for him as he is single because he is such a woman hater lol!
    One could go on.......
    George
    14th Jun 2018
    12:02am
    All this tribal analysis is a complete waste of time, and only generates employment for some researchers and provides fodder for those who play one group against another. Universal Pension is the only fair solution for all without tests.
    Radish
    18th Jun 2018
    8:31am
    Always saved 10% of my salary (even more as my wages increased). You dont miss it if it is taken out by direct debit. Never found saving a problem.


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