Early Retirement - Financial Freedom (Investing, Tax Planning, Retirement Strategy, Personal Finance)

How To Remove "Headtrash" and Spend In Retirement Without Worrying

• Ari Taublieb, CFP®, MBA • Episode 237

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The podcast explores the complexities of the scarcity mindset in individuals, specifically highlighting the challenges associated with spending even after achieving financial security. Through engaging storytelling and practical insights, we dissect how ingrained beliefs affect spending decisions.

• Introduction of the scarcity mindset and its impact on financial behavior 
• Personal stories illustrating the transition from saver to spender 
• Discussion of psychological factors influencing spending anxiety 
• Client success story showcasing the paradox of wealth and spending fear 
• Practical strategies to enjoy spending without guilt 
• Encouragement to reassess personal values and money relationships 


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Ari Taublieb, CFP ®, MBA is the Chief Growth Officer of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients retire early with confidence.

Speaker 1:

This episode is all about stories. You're going to hear different stories from both my partner, james, as well as myself, about how do you overcome the scarcity mindset, because a lot of people are good savers and that's what has put you in a position where you can retire. But switching to become a spender isn't that easy. No matter how many graphs or Monte Carlo analyses you run, or probability of success, it's hey, why is it? No matter what I look at financially, I still have this feeling of I might run out. And so we talk about what's the mindset and give you some stories that hopefully will help you out. Enjoy.

Speaker 2:

There's a story I like to tell Larry, where I was meeting with a client who had done really well. Both husband and wife had run successful businesses, sold the business, great people, good amount of money, eight-figure portfolio and we met and we went through some projections that said, look, you can live a pretty great retirement if you want and still probably have a lot more money left at the end of your lifetime at this current rate of spending than you have today which, by the way, today is a lot of money. And they're blown away. And they said, oh, my goodness, we can spend so much more. Look at these things we can do. I had no idea. This is awesome and in their minds it's all these cool things we can do is now what they're thinking about. And we had this meeting. They were in Northern California, I was in Southern California, San Diego, and so we had this meeting virtually, but they happened to be in San Diego. I think it was a week after, a couple of weeks after, and so we got lunch, maybe a week after this meeting, and we were at lunch and they shared a story. They said hey, James, you walked us through these projections and we left that meeting high-fiving, so excited. Look at all these cool things we can do.

Speaker 2:

Then we took this trip down to San Diego and we were walking back to our hotel room and we just had dinner and we get into the hotel room and there's, of course, the, the treat box. You know, there's the water bottles and the candy and the stuff. And I was really feeling. He said I was really feeling like having some M&Ms. And I went to that hotel snack box and those M&Ms were $5. And I just could not bring myself to spend $5. So I walked out of the hotel down the street I don't even know how far to the nearest 7-Eleven so I could spend $2 on a bag of M&Ms and then walk back to my hotel room. And he said what struck me was you had just finished telling us that we could legitimately spend an extra six plus figures every single year and be good forever.

Speaker 2:

But here I was unable to spend $5 on a bag of M&Ms because the sticker price. There was something that inside of me revolted against spending a little bit more for the convenience of being able to enjoy them in the room, not having to leave, not having to go through the hassle to walk to 7-Eleven, and so it sparked a great conversation. It was such a great story that I think really hits with a lot of people or connects a lot of people, not necessarily with how much money they had or how much M&Ms cost as much, as we all have those moments where maybe we've done well, We've gotten out of this phase of feeling like we're in that scarcity mindset. We have the income, we have the assets, but we can't bring ourselves to spend. We saw this in a recent comment on a YouTube video you had posted, and that's what sparked this episode. But what did the comment say that we were looking at together?

Speaker 1:

says I'm 42. My husband is 60. We have 10 million plus net worth and he was yelling at me when he saw me drink a bottle of Fiji water. I work seven days a week running my own business. He has his white collar job. He's not planning to retire within 10 years?

Speaker 2:

Yeah, A lot to uncover there. A lot to uncover. How much does Fiji water sell for? A lot to uncover there, a lot to uncover. How much does Fiji water sell for.

Speaker 2:

Maybe I want to say five, six bucks, five, six bucks for an airport, eight bucks, yeah, it's water. Maybe a lot of money for water, but you see, you know it's funny. It's, I think, easy sometimes for people to hear others people, as example, that's ridiculous. Why would you not pay five bucks for M&Ms when you have all this money? That's ridiculous. Why would you get upset about drinking Fiji water when you have a $10 million net worth?

Speaker 2:

Now I'm going to take a step back for a second. What I don't know. You should never yell at someone for doing that. It's probably not the right approach, even if you're looking to change behavior. We don't know that many details about this. Maybe that $10 million is all in an apartment building that they own and their actual income is super tight and there's some stress around money. We don't know. Maybe that's the case, but I'm going to make the assumption for the purpose of this episode. There's a $10 million liquid net worth. There's healthy income coming in, yet it's that small purchase that's really difficult to make and we see this over and over and over again, and one of the things that we try to help coach people to do is to say, okay, how do you get out of that? How do you get out of that mindset and I've got a lot of thoughts on this. But what are your? Any initial thoughts or any initial observations as to what you've seen to identify the problem or to start to resolve the?

Speaker 1:

problem. Yeah, two initial thoughts. So the first one is that is my favorite story that you tell and I now know the clients you're talking about because I was on that first virtual meeting and I remember them showing me where they lived and it was beautiful. So I know who you're talking about. Number two we have an advisor that works here at Root and his name is Jeff and he has these degrees in behavioral finance and one of the questions I asked him when he first joined us I was like he's like, why are you an advisor? Him when he first joined us, I was like he's like, why are you an advisor? And I just loved his answer. You might not, you might be confused as to why I loved his answer when you're going to hear it, but I'll give you some insight. So he said because I gave great advice to clients and they wouldn't take it. I said that's interesting, that's why you became an advisor. He goes yeah, so I would talk to these clients, I would show them graphs and numbers, show they're on track to retire. They would then tell me yeah, I feel good, maybe I can retire, and then they wouldn't and Jeff would get frustrated going. Yeah, you know, I have spent a lot of time to get these degrees. I feel very good at what I do. I'm telling clients to take action but they're not doing it. I'm missing something. Either I'm not explaining it properly or there's a bias the client has that I'm missing. I don't know. But what good is me having all this knowledge if my clients don't take my advice?

Speaker 1:

So he has these degrees in behavioral finance and the story he'll tell, which he told on a recent live show I did, was about this couple that I don't even remember the cars, but there were these cars, I guess, that had these old carpeting and he used to say that a lot of his clients used to put covers over the old carpeting because they didn't want to ruin the car. And he would talk to these couples and say how long have you had that cover over the nice beautiful carpet in the car? And they're like we haven't taken it off. And he's like how long have you driven this car? And they're like oh, like 10, 15 years. And he's like so there's all these people that have these nice things that aren't even able to enjoy them because they're just thinking about when they were younger, first purchasing that car going I got to keep the value of the car, but they never got to fully experience it. So I'm thinking about this couple here when they say I'm 42, I'm 60, we have a 10 million plus net worth.

Speaker 1:

He's yelling at me when he saw me drink a bottle of Fiji water. I think we can all agree yelling to your point is not going to be the most effective way to resolve any situation. But this is because they're humans, they're not robots. And my first thought is maybe the husband grew up really poor and never had money and the idea of drinking Fiji water is making him think well, what if they instead bought Dasani and could feed the rest of his family with McDonald's or, in California we'd prefer to say In-N-Out Burger? So those are the first things. Coming to my mind is the biases and heuristics we have.

Speaker 2:

Yeah, I think all of us, if any of us think we're totally objective about money, the only person we're fooling is ourself, because none of us are fully objective about our own money you and me included, ari, of course. I think we see that all the time. I remember so. When I grew up, my dad was a pastor. My mom stayed at home raising four kids and it was a small church and so not a lot of income, and my parents are maybe the hardest working people I know. Once he stopped doing that, he went into business for himself. Nothing came in for two years. He does well now. He does awesome now, but there's like there was a period where this money was very, very tight growing up and I remember that, um, one of the things that shaped that. So that's just the backstory, if I remember that of okay, you just there's this scarcity mindset of it's tight, so you have to preserve everything. My dad tells a story if he would have a single dollar bill in his pocket for the beginning of the month and he would say, how long can I go before I have to spend this? Like that would just be a game, and I remember in high school it might you know they were doing better at that time, the family finances were better at that time. But I remember going to Padres games with my friends in high school and I remember at the time I think it was like five bucks to park near the stadium to get. You know, you park your car, you walk in. And I would remember we would drive around literally for 30, 40 minutes a mile away from the stadium looking for free parking anywhere, and of course it's downtown, so it's nothing. But we would do that every time to save five bucks amongst a handful of friends, because you'd save $5 and you'd park a mile away, you'd walk in. And I tell that because still today, if I go somewhere, if I'm going to valet the car, if I'm going to pay for parking, there's this thing that inside of me comes up of it feels wrong. It feels like I'm paying too much for M&Ms, it feels like I'm paying $7 for this Fiji water, when that's wrong. That just goes against everything about who we are.

Speaker 2:

And so I think the takeaway for me is that mindset probably served this person at some point. I don't know what their experience was growing up. I'm sure there was some scarcity with money. I'm sure there was some challenges with money. Money causes all kinds of hardships lack of money specifically and that mindset, that scarcity mindset. We're not buying the Fiji water, we're not buying those M&Ms for $5. We're not paying for parking when we could just park a mile away and walk in. That serves you at certain phases of your life. What we are not good at is that becomes our identity, that becomes who we are. And now we get to this point where this individual commenting has a net worth of $10 million, working seven days a week, I'm guessing, has some good, healthy income coming in and that same scarcity mindset. Now, in this case, I think it's her husband that has it. But that mindset doesn't just show itself to the door Once we cross a certain net worth threshold. That mindset is who we are and if we're not careful, if we don't take proactive steps to change it, it's not miraculously going to change.

Speaker 2:

So I think that one of the things, just practically speaking, what can you do? What are some practical takeaways? Well, first and foremost, understand that that is a core part of your identity that was formed at some point, most likely during your childhood. It was reinforced over years and years and years of saying no to the M&Ms, of saying no to the paying for parking, of saying no to drinking the expensive water bottles. That identity is a very fundamental part, and at a point that identity is no longer helping you. It's no longer helping you to say you're going to save that, when you've got, objectively speaking, more than enough resources, that paying for that water bottle is a drop in the bucket compared to your total net worth. And so what you have to start doing is you have to, first and foremost, identify what are those things that are valuable for me to spend money on.

Speaker 2:

I think that there's a very fine line here where we encourage people to spend. We don't encourage people to be wasteful. I'm not telling you already go buy a Corvette if you struggle spending, if you're like I hate cars In fact, I walk everywhere so that would be a complete waste of money. But there is a point where I think, if you can recognize that aspect of yourself as step one, step two is understand what do I actually value. Take money out of it. What's important to me? Is it health? Is it family? Is it experiences? Is it giving financially to certain organizations? Is it creating a more beautiful environment where I live? Is it? Whatever it is? Is it pickleball, is it hiking? Whatever it is, it doesn't matter. But what is important to you? Step two, step number three how can I what? What is one single decision I can make? What is one single purchase I can make that would align my spending with what I proclaim, with what I say is valuable to me? And then, from how can I commit to doing something on a regular basis that slowly but surely starts to chip away at that identity, the scarcity mindset save every dollar, don't spend on anything and moves towards the identity that I want? The important thing here is it's the identity that I want, not I was a spender, now I'm a saver, or I was a saver, now I'm a spender. But both of those at the extreme aren't what we're looking for here. We're looking for a very balanced approach.

Speaker 2:

I tell the story. My wife helps me to do this. What's very funny is, before we got married, she was an excellent saver. She was very good at saving, she was very diligent, all those things, and I'll joke with her, I'll tease with her. I think that when we got married, she was like okay, well, james is obviously the financial guy, so she, I think, felt like a little bit of that burden of having to need to be the one that was proactively putting money away, proactively doing things. It was almost like that Okay, I've got a backstop here, because if I start going too crazy, james is going to step in and intervene.

Speaker 2:

But I also had the opposite. I had okay, if I'm getting too crazy on the saving side, if I'm getting too crazy on the can't spend money on that. Look at what we could save here, look what that could grow to. That's my bias. And so there's that healthy tension of I never had appetizers or dessert, if we ever even went out to dinner. So all of a sudden we're having appetizers, all of a sudden we might order dessert at dinner. It pulled against every thread of who I was to be okay with it. But I'm so grateful it did. Because now it's, how much does that enhance the quality of that meal we're going to have together? It's not everything, but the ability to relax and have that meal. Now. We're in a different financial position now than I was as a teenager trying to save five bucks on parking at a Padres game.

Speaker 2:

So part of this is you have to align this, not just what you want to be. But what's that phase of life that you're in? Sometimes you need to have that scarcity mindset, but other times you don't, and so there was that nice, healthy tension of, okay, push me to take these trips where we're going to create awesome experiences and memories as a family. Push me to do these things where something as simple as a dinner not afraid to get an extra appetizer we might not even fully eat, because, whatever it was one extra thing we got to enjoy and it's within the budget. And so I think that identifying who you want to be and then having some mechanism In my case it was my spouse.

Speaker 2:

In a lot of people's cases, hopefully it's their spouse, maybe it's a friend, maybe it's whoever but commit to something where, slowly but surely, you're going to be this person that gets really upset by spending eight bucks on a Fiji water. All of a sudden, you're saying, okay, what do I actually value? What if that $10 million net worth turned to 50 million and then $100 million, and then you died and said, well, I never actually did anything with it. How miserable of an experience would that be? So you really have to start to have the perspective of what is my mindset when it comes to money. Is that current mindset serving where I am in life and what I want to be doing and what I actually value? And, if not, how can you commit to changing it and have some forcing mechanism that keeps you committed to that change?

Speaker 1:

I know we have one advisor here that helps a client with that appetizer example. They just didn't have it in them. They went through all the projections, they know they're in a good spot, it's just not who they are, and so they felt really bad. You don't need to feel bad. You're a human, You're not a robot. I know you mentioned your valet example. If you were a teenager, James, and you were valeting everywhere, look, you probably wouldn't have the business that you have today. You probably wouldn't be who you are today. So it's about to your point. Hey, in different stages of life, no-transcript. What if they didn't ask? What if the prices were just more? Would I still feel equally as bad? Probably not. That's what's so interesting about money. If Chipotle just cost more, I probably wouldn't even think twice. But it's this idea. Hey, would you like guac? It costs extra. Oh no, I don't deserve extra. What have I done to deserve extra? That's what makes us who we are.

Speaker 2:

So great points there. Yeah, two practical takeaways that I'll wrap it up on. I was talking to this guy named Ben, who I host on my podcast, who he was just sharing his experience of retiring early. He did really well. He retired I want to say I'm just remembering these details by memory so I could be off on a little bit, but I think he retired in 2017 because he finally hit his number. But then he retired and he just like I can't bring myself to actually spending anything and, by the way, my portfolio has doubled and then some since I retired and I still can't find myself. I can't bring myself to actually spend the money. I was so focused on hitting this number, I was so focused on growing, I was so focused on investing that he got to this point where he was almost paralyzed in his inability to actually spend it until and this was a great practical tip that he shared with me he said what he started doing I have no idea how much he has in his portfolio and what amount he'd pull up He'd say what clicked in his mind is it was the hardest part wasn't even just spending it.

Speaker 2:

It was taking it out of his portfolio. So what he started doing on the first day of each year was he said okay, what trips do I want to take? Because he had just gotten back from I think it was like a cooking trip in Italy or something awesome, and I loved his example. Each year he would say this year, here's the trips I want to take. He would then work backwards into the price Okay, it's going to cost me $20,000 this year to take these four trips I want to take. Just hypothetically, he would pull that $20,000 out on January 1st. He wouldn't wait until the trips came, because he knew his natural tendency would be ah, I'm going to book the ticket. Do I really want to pull this out of the portfolio? I love seeing my account balance climb every day. His natural inclination would be not to do it.

Speaker 2:

So by pulling it out, sticking it in a separate savings account, that's just purely a travel account, it was a way of almost hacking his mind to say I've already spent it. Now all that's left to do is just transfer the money. But it's been spent in my mind. So that's one practical thing. The other practical thing is morbid as it sounds. It's like we're all going to die. And when you do.

Speaker 2:

Do you want to look back on your life? Let's assume that you have the gift of being able to reflect on your life before that actually happens. Are you going to be glad that you skimped on the Fiji water, that you skimped on the experiences, that you skimped on the giving, that you skimped on the things that you could have done? When you're sitting there in your last day with a portfolio that's five, 10 times more than you ever could have dreamed of? Are you going to be really glad that you're taking that money to your grave, or are you going to look back with regret, thinking why didn't I just do those things? Why didn't I just spend that money for its intended purpose, as opposed to tying my net worth and my purpose to that? And by doing that, I was never actually able to spend it down?

Speaker 1:

Amazing. Love those practical tips. That first one, I think, is huge. Just, the money's already been spent. It's like and I'll this will be the last story unless you have another one. You can think of James.

Speaker 1:

But I have a buddy in college who money was tight for him and we all knew it and he bought the concert tickets for all of us as a gift and he didn't feel well. So he was still telling us guys, I'm going to come to the concert. And we're like, hey, you're not feeling great. I don't know if it makes most sense to, the money's already been spent. And he goes that's exactly the point the money's already been spent, I have to go. We said the money's been spent whether you're there or not there. So the point here is for this guy he's going, hey, the money's been spent. If it turns out, he doesn't take that fourth trip because he doesn't feel well, okay, he can use it on something else. So don't need any of you to feel like, oh, I have to. What? If it turns out, I don't take the four trips, that's okay, use it for something else. But that practice works for everyone and you don't have to wait till you retire to start doing that. So love that.

Speaker 2:

Yeah, awesome. Well, I think that's a good place to wrap. This is a very common thing, believe it or not. I think it's hard for people to think that this is a problem. They think that once I get to that $10 million portfolio half of that, a third of that, a fifth of that most people would feel like everything would become easier. Then you get there and you realize it's not so. What can you start doing to shape the practices, shape the identities you want to have for yourself so that when you are retired it becomes a more natural transition you can spend on the things you want to spend money on? So we will wrap with that, ari. Where can people find you if they want to follow every single thing that Ari Taublieb?

Speaker 1:

does Every single thing. That would be a lot. I don't think anyone wants to do that. But early retirement Ari on Instagram if you want to see soccer clips and silly videos where I really try to make light of a lot of retirement planning concepts that seem difficult to understand. I'll also be on LinkedIn so you can connect with me there, and then I'm most active in our root collective, which is the retirement community that we have here, and that, I think, is where you'll find more practical tips, just like the ones James was sharing today.

Speaker 2:

James, how about yourself? Love it? Youtube is the biggest place, james Canole. On YouTube. We have our Root Financial YouTube channel, which is where this actual episode will be living. So that's at Root Financial. Linkedin, I'm more active. Instagram, I always say it, james Canole, at some point I'll actually get active on there too, and something got to keep up with you. But those are the places, the collective's big. This is something we're excited to be doing. By the time this is airing, it's going to have been out for a couple plus weeks now, but check that out. Show notes, I think, will be in the description Is that right, it will be in the description.

Speaker 1:

And my only ask for a lot of you is you listen to this every week or you watch different videos and topics. What practical tip can you give someone else that you do, really saying hey, I wish I knew this earlier. Where, hey, I just go valet, or you know what I do by the guac or whatever it is. Those are our examples. What are yours? Go tell inside the community what it is that you feel. Hey, I wish I knew this earlier, because there's a lot of people you can help.

Speaker 2:

Awesome, Love it. Thank you all for listening and we will see you on the next episode. See ya, Bye. The information presented is for educational purposes only and is not intended as an offer or solicitation for the sale or purchase of any specific securities, investments or investment strategies. Investments involve risk and are not guaranteed. Any mention of rates of return are historical and illustrative in nature and are not a guarantee of future returns. Past performance does not guarantee future performance.

Speaker 1:

Viewers are encouraged to seek advice from a qualified tax, legal or investment advisor professional to determine whether any information presented may be suitable for their specific situation Once again.

Speaker 2:

I'm James Canole, founder of Root Financial, and if you're interested in seeing how we help our clients at Root Financial get the most out of life with their money, be sure to visit us at wwwrootfinancialpartnerscom.

Speaker 1:

Thank you all, as always, for listening to the Early Retirement Podcast. I love getting to host these shows and make different content for you guys every single week. I've not missed a single week in years and that is because I love getting to do this. Now, please be smart about this. Before you actually execute any strategy that you see me talk about or hear me talk about, should I say Please talk to your financial advisor, your tax preparer, your estate attorney. Please be smart about this. None of this should be construed as financial advice. This is for fun, educational, informational purposes only. Once again, just quick disclaimer here. Guys, please be smart about this. Appreciate you listening, as always, and you can, of course, submit a question on my website, earlyretirementpodcastcom, If you, of course, want me to address a specific case study or topic. I will not promise I can get to it, but I respond to every single person and if I find it will be helpful for a lot of people, I will absolutely make an episode on it, At the very least give you some insight.

Speaker 1:

That's it, Thanks guys.