This is the Biggeset Way People Waste Money in Retirement
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I talked to a client the other day, and this client has been a great job of saving, preparing for retirement. They have all their income anes met by social security. They have a multicenter figure portfolio, a few million dollars in their retirement portfolio.

They're perfectly squared away. They can meet all the retirement needs. And then some, as client recently done a home medici, an the'd expand their home.

And they were talking about furnishing IT. Now for a perspective, I think most of us would consider home furnishing es more or less in essential expense. Sure, you can live without IT, but kind of essential kind of something that you need for a home, especially if you can afford IT.

Now, I was talking about this, and they shared with me they said, we're struggling with this because we don't want to waste money. Now i'm going to remind this client a few million dollars in the portfolio. Their social security needs not just about all of what they needed to spend in retirement.

They don't have a mortgage on their property yet. They were struggling to furnish their home because they felt like a waste. So I was thinking about this, and I wanted to record an episode both with what I shared to that client as well as just higher level principles.

Now as we do this, today's episode has very little to do with numbers. It's attached numbers, but more so incidentally, this has little to do with the actual numbers. The actual nuts and bolts of preparing for tirely instead has everything to do with our mindset and retirement.

This is another episode of ready for retirement. I'm your host, James can all. And i'm here to teach you to get the moss of life with your money.

And now aren't the episode. Today's episode may hit home with a lot of you. Some of you may not be able to comprehend how anyone could think or feel some of these ways that can be talking about, and that's okay.

But for those of you that, that does hit home with, I wanna reframe the way a lot of what you think about your portfolio, the way you think about retirement and maybe even the way you think about your life to a lesser degree, because i'm going to go back to this client in this client story. We don't want to waste money. None just want to waste money.

We don't want to waste a precious resource that feels irresponsible, feels waste for IT, feels scary even especially if we have the scarcely run money and not unnecessarily knowing where the next dollars going to come from. So waste can be a very bad thing. But here's what I want to unpack a little bit.

I want to start almost my first principal standpoint of reminding us all the money itself does not have any true intrinsic value itself. Now before you go there, this isn't to conversation. This isn't a podcast episode about money.

There is a gold standard that's typically where people go and they talk about story value and was actually back in money. No, when I say money doesn't have any true and trinity c value itself, what i'm saying is that money is simply a store of value in the medium of exchange. What do I mean by that? Well, let's assume that you are a software engineer.

You want to take a trip to hawaii. I you're not going to call hawaii airlines and offer your services and exchange for a round trip ticket. Now that's what you offer money for.

Money is an exchange of value you are going to get paid by your employer to the extent they value your services. As a software engineer, you're gna get paid in money. That money is is a story value.

And you exchange IT for things you want, in this case of light, to help. Now that's a very basic and simple example. But what do I mean by that? The money in this instance is simply a store of value, and it's a means of exchange, is a medium of exchange.

So here's the problem that sounds obvious. So obvious. Some of you are thinking that this is may be the weird to episode i've ever record IT.

Well, I stayed that because the problem is, when we go from thinking of money as a stora of value or exchange of value, we wrongly begin to think that money has value in itself. So we must remember that money has no intrinsic value outside of what IT can be exchanged for. So my client told me, he said, I don't wana waste money.

This is what I told her. I mean, call her Sarah. I can say, Sarah, you know, you are actually wasting a tremendous amount of money by not furnishing your home with the furnishings you want.

And here's what I mean by that, your money baLancers going to continue to grow your seven fig portfolio, your healthy seven fig portfolio. That's like they continue growing for the rest of your life because you're not gna need to spend all that much of IT to meet your needs. Or seven figure portfolio could very easily be in eight or even mute eight figure portfolio by the you retire.

And from that standpoint, you have preserved your money, but you have wasted IT. In my opinion, you have wasted IT because you never actually exchanged IT for the goods and services. You never actually exchanged IT for what you wanted.

So by not court and quote or wasting your money on these functions, es, you actually waste significant amount more money because as we run your projections, you're more than likely do not only meet all of your knees to a retirement, but have a big giant portfolio left at the end of IT. And if that portfolio simply goes with you, if we go back to money and its actual purpose of being an exchange of value, you never got to exchange IT for anything you worked for that. You saved that.

You invested that, you grew IT. You did all those things right until I actually came time to use IT. And if we think the money itself is the ball and all, and that has value in of itself, we've missed IT because its value, again, is only in terms of what we can exchange IT for, what we can exchange IT for, in terms of experience, in terms of things, in terms of giving, in terms of things that we can do to increase our quality of life in the lives of those around us.

So that's what I share you with Sarah. I said, Sarah, know you don't want to waste this money. I am encouraging you to do what in your mind is a waste, because if you don't actually spending of IT, that will be the true waist e, that will be the true waste when you pass away, hopefully sometime distant in the future, and realized that none of the things that you wanted to do, we're actually done because you had so much trouble spending IT.

So this transitioning is nice than the two points that I wanted make in today's episode. And these points come down to the diminishing marginal utility of money. If you you've ever taken an economic class, you remember talking about diminishing marginal utility.

So there's two reasons for this. Number one, wealth has diminishing marginal utility. What does that mean as you acquire more money, the additional satisfaction benefit you gain from each additional unit of money to call each traditional hundred dollars, thousand dollars, million dollars, that decreases.

Now this makes sense. We all know if you're make less money, if you get a little bit more IT feels a way Better and if you're making a lot of money and get a little bit more. So if you're making fifty one thousand dollars a year and cost fifty thousand dollars to live, well, the basic maths shows us a only a thousand dollars of directionally income in that example.

And if you only have a thousand dollars of directionally income in a year, for example, and someone hands you a hundred dollar bill, that feels really important, that feels really big in the importance of saving that, preserving that and growing. That is pretty significant in this example. But if you're making five hundred thousand dollars a year and you only need fifty thousand dollars to live, someone handing one hundred dollar bills, a nice suggestion, but it's not going to change your life in any material way.

That's because of the diminishing marginal utility of those dollars. This is the principle that as wealth grows, each traditional dollar saved. Each traditional dollar received has less and less marginal impact.

Now here's a thing. Many people who are wealthy today, many people who are retiring today, they are approaching or tired with almost this, learn through meaning. When they have first started out in their careers, they weren't necessarily wealthy.

In fact, many them were far from IT. They weren't wealthy, but they lived frugally, they lived within their means. They priorities saving, they prioritize investing, and they learn this mindset that you must save and you must live frugally.

There's nothing wrong with that. But as they get older, as they approach retirement, as that sense of scarce vy lessons, that mindsets day is the same. I told the story before, but my grama, she's in the nineties now, and he grew in the depression now.

SHE always finishes her meal. Never seen her, not finished her meal. I know while back we're in dinner, my parents place my grandma's there, and we'd all finish our meals. And we were kind of moving on other things in my grandma gene SHE was still there are finishing and I am kind of a tongue cheek way, said, hey, he was the last time you didn't finish a meal kind of, uh, just a fun jb fun. Poke her do that and SHE took the question seriously.

He said, oh, you know, I think it's probably actually been, uh, since I was a little girl, you know maybe eighty five, ninety plus years that I haven't not finished a meal and IT blew me a way because to me it's no big deal if I don't finish a meal, kay, I get a meal. I eat what I want. If I want the rest of that, I don't eat IT.

But to her growing up in the depression, growing up when food was scared, growing up when you didn't know when you're next meal or where would come from, of course you finished your meal, the importance of that was enormous. Now, by the way, kind of a side note, this compassed on generations. I remember as a kid, my dad, who is my grandma son, he would often say, waste, not, want, not, never thought much of that.

But I gotta believe that something that came from my grandma and my grandpa on their generation of growing up and depression IT was so important not to waste to money, not to waste food, not to waste anything. So want to go back to this term, waste, waste somewhat relative here, and we're going to see that as we continue to explore this. So my grandma's mindset around food was, you don't know where the next mus going to come from, therefore you need to eat everything well.

Now he does know where her next meal is going to come from. SHE is in a position where that's not necessarily a concern or a fear that there's not gonna food the next day. However, he still eats everything, not from a godness standpoint, but from the standpoint of this scares.

I must preserve IT. That reminds me of a term or saying that have been having a lot more five to years. I know IT all the time, but their certain instances, I think this time max, lot of sense IT is the term the same that you should cut out whatever doesn't serve you.

I'm going to to borrow that sae for a second for my grandma when food was scared, when is a great depression, eating everything really served you because you didn't know where your next was going to from. You had to eat, was in front of you. That's what that served you today, knowing where her next meal gonna come from and continuing to eat everything, I would argue SHE might disagree.

But that no longer serves her. There is no longer a need to do that at one point that minds that was helpful and served her once that basic need was mad IT no longer does. Now why do I tell that story? I tell IT because i'm in related to the attitude in the beliefs.

A lot of people have our money, even if these are subconscious attitudes. Are subconscious beliefs role in our career? We think I need to cut out eating out. I need to cut out vacation so we can save or we think don't waste money so we can save or we don't spend money foolishly so that we can save. Now that served, you IT allowed you to get ahead and allowed you to save, allowed you to invest and allowed you to get the position where, like my client, you can be in your sixties with few million dollars and have all the money that you need to maintain a comfortable lifestyle. So that mindset once served you, but now that you've saved, now that you've built, now that you're financially free, that mindset maybe no longer serves you.

And in fact, that might actually backfire back firing for the reasons that I stated before, that by not quote and quote waste money on things today, there is going to be a much larger waste where in the future you need passing away with a lot more money than you know what to do with because you didn't know what to exchange IT for IT, because you didn't properly value that money. And the context of what I could do for you. So that's one of the principles I wanted to talk about today, that we need to understand the diminishing marginal utility of money.

This isn't just an economics mental textbook. This is very real. And I see IT a lot that people who have grown their wealth that have saved, that have done well, it's difficult t for them to spend.

It's difficult for them to feel like they can spend money because IT feels wasteful ful. Because back in the early twenty or thirties or forties, even maybe IT was watered, but now there are a completely different position and they're not spending that money. That's money that's ultimate to going to become wasted.

Now the second thing is this, as we talk about the two core components I see with the diminishing marginal utility of money, the first is just wealth. As wealth increase is the value of money decreases to us, at least the value of the next marginal dollar decreases to us. The second has to do with age.

Charlie monger, warm buffer s business partner. He died in november of twenty twenty three, and when he died, he was worth and estimated two point six billion. Now i'm not going to say that charly monger wasted two point six million dollars me past.

I know we have some of charity of the family. I have no idea what that was like, carney, the actual details around this. So i'm gonna go so far to say he wasted.

I do not think he did. And I don't know much about his personal life. But what I do know is this, shortly before he died, he SAT down into an interview, and in that interview they were reflecting on charlie monger's life.

And with a ten of sadness in his voice, he said, I would have paid any amount of money to catch a two hundred pound tuna when I was Younger. I never call one. There are things you give up with time and quote, and that seems simple enough.

But as charlie monger, a billionaire who is accomplished a ton of the course of his life, and lip the ripple, age ninety nine, as he was thinking back on his life, IT wasn't a giant pile of money that he valued. IT wasn't this two point six billion dollars what he died? Was this experience, or really that lack of experience, of saying what I would have done to catch a two hundred pound tuna when I was Younger?

Now in that moment, how much of his two point six billion or fortune do you think he would have paid to have his health, his strength, his vitality, to go catch tuna, have to, even beyond boat, to go watch other people? Cat, tuna, it's one, nine, ten, nine, one billion. I have no idea, but I do know that would be a lot.

So going back to my client conversation, they said they didn't want to spend money and furnishing their home. They feel like you'll be a big waste. I get that.

But let's compare this, the charlie monger case, all he could think about a few weeks before his passing was, I wish I won't had this experience and nothing to do with how much money he had or didn't have for my client. So that is something you don't do that. That is something that you don't waste this money on furnishing your home and you live a great thirty forty plus your retirement.

And one day, as you're going to close the end, you look back, are you going to be really happy that the money you could have spent continue to stay in your portfolio and now you have several million dollars in portfolio that you're never going to have any useful or even to look back on that and wish, you know what, I wish I had to spend the money to finance the home. I wish I had created that environment thought of good for me and my family. I wish I had created that environment where we could live the course of our retirement happily, the host, to do whatever we want to do, whatever is most important to you, which are you gonna regret more?

My guess is, at that time, the bigger waste we will feel like not having spent IT, we'll feel like the most experiences, we will feel like the things that you could have done. But you did not for fear of wasting dollars. Instead, you wasted experiences in quality of life.

So as we get older and as we get my money, I would argue that money has less margin utility IT becomes worthless and less to us. But time is the opposite. As we get older, time becomes worth more and more. So one key principle here that's slightly unrelated by things mostly related what were talking about, is that what we learned overvalue money over the course of working lifetime, we also, in a way, learned under value our time in the precious we source. That IT is, when I say a learn not necessary, is a good thing, things a bad thing in this case.

So what can we do about IT? Well, might take away here is how can we audit our decisions? How can you look at yourself almost as if you're outside of yourself? IT starts by becoming aware the decisions that were making.

This goes for all aspects of our life that become aware the decisions that you're making and ask yourself, why do you continue to make those decisions? Are they to use the term a use before? Are those decisions serving you? Or did they maybe once serve you, but they no longer do so? Take a step further, not only are they serve you, but maybe are some of those decisions actually read contrast to the life that you say you want to live.

So that's the takeaway. The solve, I think, is this. Benjamin heart is a great author that I learned a lot from and talks a lot about viewing yourself in the perspective of what would your future self say? He has a quote for more.

As box me directly, he says, quote, your actions come from your identity. When your identity is rooted in current commitments rather than your future self, your actions are weak and online with your goals, the only way to realized your future self is to be your future self. Now, now that quote, outside the context of what he'd been talking, the book may mean a lot.

Try to see the best. Use myself as an example. I will look at myself and say, who is future James? What is relationship like with his wife? What is relationship like with his kids? What is he doing to live out his personal values? They don't look at my current self, the current James.

And what I do today, am I priorities in the types of things that will lead that type of a relationship with my wife, they will lead that type of a relationship with my kids, that will lead to that you fill in the blank. Whatever outcome is desired, is my life on the right trajectory. I think we can do the same thing when IT comes to retirement.

When we look at our future self psychologically like a completely different person than us so far as to go back to my client and call her sa sarra looking your future self, are you going to be happy the of a few more dollars in your portfolio, but didn't have the ability to furnish the home to create the environment that you want to live in? Is that what your future self would be glad that you did, or at your future ourself? So you know what, sir, I really wish you had spent some more money to furnace at home.

I wish you had spent some more money to do these things that would have LED the types of memories and type of fulfillment that I is your future self, what advise you to make. So when we can start to think of ourselves as as two different people, both our current cells make the decisions today as well as our future selves, helps us to priorities those decisions that can become a very effective exercise. So we think about money as we think about retirement.

You want to retire, you want to travel, you want to volunteer, you want to play, you want to do these things. So why we so concerned about wasting money? If this is a big assumption, of course, if we have already the means to do everything that you want to deal.

So as we think about this, this episode may mean nothing to a lot of you. You might say, jams, I have no problem spending money in the things that I want to spend money on. Others of you I know are probably saying, at least James, you know, I mean, and sir, we probably have the same issue.

We've done well, but that mindset that got us here isn't going to get us to the next level. What got you here isn't going to take you to where you want to go. One, the best things you can do for this public journal, audit your decisions, all of the things that you're doing, audit where you want to be in the future or at least right down where you want to be in the future and see if there's congress there is where you want to be.

Keep that in mind or get that in your mind, are the things that you're doing today move you closer to that version of yourself or they move you further away? They supplied more than just money. But of course, this is a podcast.

This is a message about retirement and how we can make the most meaningful, enjoyable time possible. So that's a rapper today. I hope that was helping is a of non traditional topic in the sense that doesn't actually have to do with the numbers.

But IT doesn't matter how much the numbers work out. IT doesn't matter how much you're doing in terms of tax strategy or how big your portfolio is or what your income strategy is, you're not doing the things you want to do to quit a mean for retirement. None of that actually matters.

So this actually becomes a foundational piece over tirely planning is making sure that we're viewing money in the right way, the proper context to ultimately get the most out of life with our money. That's IT for today. Thank you, is always for listening, and i'll see you next time.

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