"Every man is rich or poor according to the proportion between his desires and his enjoyment." - Samuel Johnson

Save, save, save! Isn't that what financial planners should encourage their clients to do? After all, we are all taught that spending is bad and saving is good. Do a Google search for the words "save and spend" and you will find at least 100 hits that encourage saving to every one that says it's OK to spend money. Of course, financial institutions and many advisors are taught to persuade their clients to save as much as they can to assure their futures. While it may be presumptuous to profess to know their motives, it is certainly in the best interests of product vendors and advisors, paid based on the assets they manage or sell, to encourage as much saving as possible. But should financial life planners, whose mission is to improve the quality of their clients' lives, adhere to this "one-size-fits-all" advice?

A couple of clients we recently obtained (we'll call them Bill and Sally) show us how misguided advice can affect the quality of people's lives. They were told by their previous advisor that they needed to earn 8% on their investment portfolio in order to maintain their lifestyles for the rest of their lives. Bill is 70 and Sally is 60. They have no children and therefore are not concerned about leaving a large inheritance. While they are extremely risk-averse, they were encouraged to invest a large percentage of their money in equities in hopes of getting an 8% return. As a result, they were literally kept awake at night during the crash of '08 and '09.

As a matter of fact, even with the recovery, Sally told us that she only buys at thrift shops and agonizes over any money she spends that is not for what she considers necessities. Based on what she was told, she fears that she will run out of money.

Here are some more facts: Their investment portfolio is valued today at $3,250,000. They have about $50,000 a year in pension and Social Security benefits, and they currently spend a total of $85,000 per year. They would like to spend more, but they are afraid. Simple math will tell us they need to withdraw about $35,000 per year from their investment portfolio. While I'm not a fan of formulas that tell us what a safe withdrawal rate is, I'm quite confident that they could spend much more than they do with little or no fear of ever running out of money.

Not surprisingly, the allocation that would make them much more comfortable-30% equities and 70% fixed income-had a 100% probability of success under a Monte Carlo simulation. Meanwhile, they also had goals that they were putting off, such as remodeling their kitchen, increasing their travel, buying new clothes and going out to dinner more often. We factored in these goals, too, and the probability of success remained at 100%. Moreover, linear projections indicated that they were likely to die with many millions of dollars.

We then "pushed the envelope" for additional spending and discovered that they could probably spend an additional $30,000 per year inflated at 3% and still have a 96% probability of success. While they may not do that, it certainly was comforting for them to know that they could.

Yet their previous advisor had successfully frightened them into a frugal lifestyle and made them very anxious, particularly when the market crashed in 2008. I suppose he could have defended himself by saying that conservative projections are in the best interest of the client in all cases. After all, over-saving is never as much of a problem as overspending. But even though I agree with that, I don't believe that it's the duty of financial life planners to be overly conservative. We need to be realistic. What is the benefit of a client dying with millions of dollars more than what she wants to leave to her children, while at the same time she has deprived herself of amenities she would have enjoyed while she was alive? Who will point that out to her, if not us?

Of course, it is our responsibility to make sure that our clients are not overspending today in a way that will jeopardize their futures. It is our experience that people seldom keep a healthy balance between saving and spending. We have young clients who earn substantial incomes and save so little that, without drastically reducing their spending and increasing their saving, they are facing serious problems in the future. We also have retired clients who give more to their children and grandchildren than they can afford to, so they also risk running out of money.

We need to use all the tools at our disposal to convince these clients to change their behavior. However, we also need to give balanced advice. And for many of our clients, that means encouraging them to enjoy their lives today when they can afford to. As I have mentioned before, our firm's mission statement is quite simple: to improve the quality of our clients' lives. And for us, that means promoting spending, not only saving, when appropriate.

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