I thought I'd share something I used to tell potential clients with grossly under-funded retirement accumulations, often in first interviews. It often worked like magic. They'd often show up around age 55, about 10 years before retirement age, when they couldn't put the inevitable off any longer.
I'd say, "Live like no one else will for 3 years, live like no else can for the rest of your life."
I'd develop the theme, a road map from there and it gave people relief, hope. What I often found would be two people, a husband and wife, with combined incomes often exceeding $100,000 after taxes, kids grown and out of college. It wasn't an income issue for them, per se, it almost always related to spending, budgeting. And, I'd expose them with the next question:
"Give me your monthly budget, how do you spend your income?"
The standard answer would be: "$1500 on our mortgage including taxes and insurance, $500 on medical insurance, one car payment of $250, $500 on food, $250 on utilities . . ." and on and on they'd go until they ran out of things that popped into their heads. It'd often add up to $5,000 a month. They'd run out of ideas.
"Anything else?" They'd say, "No, nothing else comes to mind." And, I'd say so your after-tax income is $8,333 a month, you can name only $5,000 in living expenses . . . what of the other $3,333?"
These couples would look at each other and you could see the question marks in their expressions. I'd end the suspense by saying something to the effect that "there are $3,333 worth of expenditures that you can't even put a name to and yet they have taken precedence over investing toward retirement for the last many decades."
Anyway, we'd do budget work from there, move retirement savings "up" on the list of monthly things to pay giving it priority over the "unnameable."
Saving the $3,333 each month for a decade in a tax-deferred account, using 8% returns from a balanced fund, would accumulate over $600,000. No, not super wealthy, but by then with a paid off mortgage, Social Security checks, they wouldn't end up like mendicant pigeons. With a paid off home, a few other assets, they might even be millionaires.
The "live like no one else will for 3 years, live like no one else can for the rest of your life" works in cases where clients need to sort of go very "minimalist" and shed big chunks of thoughtless "luggage" we all seem to accumulate to some extent. This is harder core than just saving money that is thoughtlessly spent. This might entail selling almost everything, moving into an efficiency apartment, dropping down to one car, eating at home and not out at restaurants, etc. For many, this might allow them to save $50,000 a year.
Perversely, at the end of 3 years, they might find themselves happier without all of the pressure of life's "luggage," and continue forward in a modified version of this lifestyle.
Anglers should understand this. It is very similar to cleaning out and organizing our tackle boxes. Lots and lots in them that we never needed, don't want, can do without.
Brad
