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Before you can effectively put together a retirement income plan, it’s important to understand your own tendencies for spending. Let’s explore the different personalities. Important Links Website: http://www.yourplanningpros.com Call: 844-707-7381 ----more---- Transcript Of Today's Show: Speaker 1: Hey everybody, welcome into mid-June here. We're back on Plan With the Tax Man, with Tony and myself. We're going to talk about our spending personality. What is your personality type when it comes to spending? It's pretty important to figure that out, and it's even more important to not only figure that out for yourself, but also share that with your advisor, and your financial strategist, your tax professional, and that's what we're going to talk about this week here with Plan With the Tax Man, with Tony Mara. What's going on, my friend? How are you? Tony: Good, enjoying the summer so far. This is my time with my spending personality where I generally spend more. We're out, we're traveling, we're doing this and that. It's timely, because I think... And we ask and talk about this a lot, and so, it's going to be a fun topic today. Speaker 1: I think, again, it's pretty important to self-identify, which is a big term nowadays. We hear it all the time in the social context. But when we're talking about our money and our finance, if you're not honest or don't know who you are when it comes to how you spend money, and by the time you get close to retirement, surely you know this about yourself, and have come to grips with it. But it's just as important to share that information with your advisor, and your financial professional, and your financial team, so that they can plan accordingly. There's nothing necessarily wrong with any of these categories that I've got for types of spenders, Tony. But if you're in one category, and your spouse is in another, and neither one of you are being honest with your advisor, it's making it pretty hard for them to get you a good plan that's going to get you to and through retirement, right? Tony: It is, and it's something we ask everybody when we first meet with them, and the spouses as well. Because I like to know, just like you said, what kind of spenders they are, and if they're saying that they don't know, then we start asking some questions to try to identify it. Along with this, many, many that we talk to don't have... I think you can kind of generalize your spending personality, but a lot of people still don't use what I call personal finance software, whether it's Mint, Quicken, or what not, just to track your spending, see what's happening in the household, and then sitting down even without your advisor and discussing that on a personal level. Tony: They don't do that. It's out of the checkbook or the debit card now, and nobody even looks at their bank statements. So, they really don't know what they're spending it on, so they kind of generalize this, and we try to get them to look a little deeper. Again, when we go over these, if you're out there listening, you're going to identify with one or more of them. Speaker 1: Exactly. And I was going to say, that's a great point as well. You'd be surprised if you do some personal software type of tracking or budgeting. I know nobody likes the B word, but if you check that, you're often surprised, more times than not, nine out of 10 people are like, "Wow, I had no idea we were doing this much in these different ways." Let's dive into these categories. And again, you might find to be one or more than one, and you may be thinking about your spouse or significant other, and they may be the same way. And I'll play along and say the same thing, and Tony, you can as well. The first one is, the emotional spender. Talk to me about this. Give me some bullet points. What's an emotional spender? Tony: This is somebody that just spends as it sounds, just when they're emotionally riding high or low, and that determines how they spend their money. For example, they may get a promotion, and then they'll say, "Great, I'm going to be making more money. I'm going to go out and buy X." Or, "I just got laid off," and oh gosh, instead of not spending money, they say, "I'd better go out and maybe drown my sorrows." Speaker 1: "I'm depressed." Right. Tony: "I'm depressed. Let's go out to eat, or do something." It's kind of a rollercoaster, because they're up and down with how their emotions go, and how they spend money. And so, sometimes that's not the greatest, because we're all going through ups and downs, and if you're letting that determine how you spend money, and you're not tracking it very well, you could end up wasting a lot. Speaker 1: Yeah, and if we're talking retirees, pre-retirees, which is the bulk of our listening audience, our demographic, I like the concept for me, is like, "Hey, had a great day. Honey, let's go out to eat and celebrate." "Oh man, I had a terrible day, honey. Let's go out to eat, so I can feel better." Right? Or, "I'm really tired or stressed, and you don't want to cook, or I don't want to cook. Let's go out to eat." That's kind of where my wife and I sometimes, well, prior to the pandemic. Starting to just get back to that now, but that's where we would kind of find ourselves on that emotional wagon. It doesn't necessarily mean like a shopaholic. It doesn't mean that every time you have an emotion, you go on Amazon and buy something or whatever, but you may have a piece of that. You may have a percentage of that type of personality that does affect you. Speaker 1: And so, identifying that just so you know, can really come into play when you're trying to work through... Sometimes people don't want to call it the budget, and what you guys do, and you're trying to get people to budget a little bit, just so you can see what's coming in and out. Not live on a restrictive lifestyle, but just understand the income and the outcome. I think a lot of advisors are starting to call it a personal spending... They're calling it a personal spending list, or chart, or something like that. It's got a nicer ring to it than, "Hey, let's figure out a budget." So, emotional spending can be one of those places you find yourself, or you might find yourself as the YOLO spender. What is this? Tony: This is me. This is where I would classify myself, because it's basically somebody that spends money that they're going to, I don't want to say, live for today, but you only live once philosophy. It's easy for them to get a little overboard, spend lavishly on experiences and things. I would say I'm in it, and this is not a bad place to be, as long as you have all your bases covered, meaning that you're saving for retirement, you are out of debt, you've got enough money, discretionary income to go do some of these things. Because once you have all those envelopes or buckets filled up every month, and you still have money left, well then, that's your fun money, type of thing, at least in my opinion. Tony: But if you're not tracking this, again, this can get out of hand, especially on things rather than experiences, for sure, where you can actually end up spending more than you're taking in, and you're wondering why you're going into debt. I don't do that, but I do fall into that category of, after everything is covered, this is time for me to enjoy things, type of thing. But I'm one of those guys, I don't buy a lot of things. I do like to travel and have experiences. I guess that would be my weakness. But I think, again, not necessarily a bad place to be, but with some constraints. This one especially, you need to be tracking, because if you find you're out buying a lot of useless toys, I call them. Speaker 1: The big ticket items, yeah. Tony: Yeah, big ticket items, you're not going to use them, and then you turn around and sell them, and then of course you're going to take a big hit. You've got to rein that in at some point, otherwise your whole plan is just not going to work. Speaker 1: Right. And so, the YOLO spender, you only live once, that's the YOLO there. Actually, Tony, in a way, we saw a bit of an increase in this through the coronavirus, with the pandemic. They were calling it the coronapurchase. And so, people, when we couldn't go and do things, and so on and so forth, you were seeing people, in-home pool sales were way up, hot tubs were way up, campers were way up. Because okay, we can't go to restaurants, and we can't hang out, but my wife, and myself, and my kids, we all live together. We can be in a camper together, so we can go camping someplace. Speaker 1: We saw a lot of those kinds of items, where people were ticking those things up. It could be some big tickets. And now that we're starting to get some freedoms back, you may see that switch to the experiences, to your point, right? Back out to concerts, or back out to this big vacation we've waited a year-and-a-half for, that kind of thing. I'm with you, I find myself to be a bit of an emotional spender, and a bit of the YOLO spender. Speaker 1: I don't have a problem with a big ticket item, but I will be ticked off at myself if I go to Target and spend $100 and think, "What did I spend $100 on at Target?" And it's all little things in my car, things that you probably actually need. But I'm one of those people that a big ticket item doesn't scare me as much, and to your point, that can get you in trouble as well if you're not planning ahead of time. And for retirees and pre-retirees, that becomes more and more important. All right, that's the first two. This next one I imagine is probably the ideal place you'd like people to be, in your profession, and that's the savvy spender. What do we got here? Tony: Yeah, so this one in my own family is my wife. She's much more balanced than me. She'll spend money, but she prefers a deal. I wouldn't say she's ultra tight, so to speak, but she's frugal. She does like quality. She does not like to just buy something in bulk. But she'll pay more if she feels like it's good quality, but she'll take a deal anytime she can. Whereas me, going back to the last one for a second, I really don't look for deals. I don't know why. I probably should, but I don't. But she does, and she likes to spend on experiences as well. She comes from a country background. I always say that she's a farmer, but she gets mad at me when I say that. Tony: Stuff doesn't interest her, whether it's a big ticket item, or things like that. About the extent of what she likes obviously would be clothes and shoes, but she'll be very savvy about that. She's the kind that would walk into a store, let's say you're looking for some furniture, and she wants to look around and compare. Me? I'm like, I want to go right to this. I think I know what I want, and sometimes I get this way, the more expensive, the better. And then, she has to talk me down off the ledge, so to speak. Speaker 1: I think that's common a little bit sometimes between men and women, often in a relationship. Luckily, my wife and I are the same way. Neither one of us are big fans of shopping. If we go into a store, it's like, find it, get it, move on it, be done with it. But yeah, you could definitely have two different kind of personality types, where one is, hey, I see it. I need a couch, we went here, I like this couch, I'm done. That sounds like that might be you as well. And the missus could be like, "Well, let's look at five stores, and 20 different couches." Tony: Yeah. I can't stand that. Speaker 1: Right, drives me nuts as well. Tony: Yeah, but there's nothing wrong with that. Speaker 1: Absolutely not. Right. Tony: I'm all more about, God, the value of my time is worth more. Speaker 1: That's a great point. That's a great point. In any of these spending categories, what is the value of your time worth as well? That's a great point. All right, so the savvy spender, again, balanced personality, thrifty when need to be, but prefers quality over quantity, things of that nature. And then, that brings us to our last one here, and that's the miser. And don't take offense out there folks if you're one of these. There's nothing wrong with it. Again, there's nothing wrong with any of these, it's just being honest about who you are, and then working with your advisor to be according. But I imagine the challenge for the miser, Tony, when it comes to what you do, this is the person who, or persons, who have saved really well, they're in really good shape for retirement. Now the problem is, you can't get them to spend the stuff and enjoy it. Tony: Exactly. They don't want to spend anything, only if they have to. They get very stressed out about spending anything, especially if it's a big ticket item, even though they may need it, almost to the point where they feel very guilty about it. Speaker 1: True. Tony: These are the types that to the extreme, I would say, always trying to cut corners or costs on everything. Speaker 1: Which is why they've got a lot of savings, probably. Tony: That's why they've got a lot of savings. But it's trying to convince people of this personality of, okay, you've done a good job of maybe saving, you've sacrificed a lot. What's the end game? What good is it if you're not going to at least kind of enjoy it before you check out? To me, the miser personality to me is like, why go through all that, and put yourself through all that maybe for 30, 40, 50 years, if you're not going to enjoy it? I did have one guy say, "I wanted to leave it all to my kids." Okay, that's great, that's very noble. At least you have something, a goal in mind. But most are like, "No, I wasn't brought up that way. We were extremely low income growing up, and we didn't have a lot." Again, it's not bad, but we try to at least know what we're dealing with as advisors, because we certainly don't want to offend somebody that's of this personality. Maybe just try to get them to look at some different views. Speaker 1: Sure. And I think with this kind of category too, well, really all of these, Tony, it's a great point, how we're raised plays a massive factor in how we view money, and how we treat money. It's almost like cigarette smoking in a way, and I'll say what I'm talking about there. My dad was a heavy cigarette smoker, and so, it turned me off so completely, I've never touched one in my entire life. I've had no interest in doing it. However, you could see that same thing with money. Speaker 1: So, your parents might have been very tight, very frugal because they were low income, or maybe they came out through the Depression, or something like that. And so, therefore, you're that way. Or maybe you're the complete opposite, because they were always so tight. Now, you're a YOLO, or whatever the case is. It's just important to get in touch with who we are. Speaker 1: And again, none of these are bad, none of these are wrong. It's simply understanding it, so that your advisor and your financial professionals can say, "Okay, this is who you are. This is what you want to accomplish or do. That helps me plan accordingly, so that I can structure this stuff for you to have everything you need when you need it, or how you want to, whether it's a legacy, or whether you want to spend it all and take every dime with you." Tony: Right. Like I said, there's nothing wrong with any of these. But I think that a lot of us could benefit from listening to some different views on it. But for sure, from the advisor side, it's nice to know. And we ask a lot of questions when we're working with clients, and you could tell right away kind of what type of personality they have about spending. It's a fun exercise, and people generally will laugh and say, "You know what? That is me. You're exactly right." And we're not trying to change them, for sure, but it's a lot of fun. Speaker 1: I think what will happen too, Tony, and I imagine what could be really challenging, is if you've got one partner is a YOLO, and the other partner is a miser, I imagine that can be an interesting challenge, and they know it. They probably butt heads about it, and maybe even have a giggle about it, or whatever. But that kind of goes into play with that other hat that sometimes you have to wear. You put on your tax hat, sometimes you put on your advisor hat, sometimes you put on your marriage counselor hat, by saying, "Okay, look guys, we've got to move this YOLO a little closer to the savvy, and we've got to move this miser a little closer to the savvy, so that y'all can enjoy everything together." And so on, and so forth. I think that's again, the value of where an advisor and a financial professional comes into play. Tony: Yeah, I agree. Speaker 1: So, folks, what are you? Are you an emotional spender, a YOLO spender, a savvy spender, a miser, a little bit of all? I think there's probably a little bit of all of us in each one of those. Again, hopefully you enjoyed that exercise. And if you haven't had these conversations not only with yourself, but with your spouse, and your advisor, do so immediately, because it'll certainly go a long way to helping them get the plan together that you need. And if you need some help, reach out to Tony at yourplanningpros.com. Visit him there on his website at yourplanningpros.com. Tony, thanks for hanging out with me this week. I'm about to get ready to get hit with some big thunderstorms, so I'm going to let you go. Tony: All right, sounds good. Take care. Speaker 1: We'll talk to you next time here on Plan With the Tax Man, with Tony Mara from Tax Doctor Inc. You folks have a great week, and we'll see you in July here on the podcast. Disclaimer: Securities offered through Avantax Investment Services. Member FINRA, SIPC, Investment advisory services offered through Avantax Advisory Services. 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