“If I just had more money, life would be easier.”

 

Does that sound familiar?

 

Here’s the interesting part: Everyone says it. From our retired clients to our teenage kids, and everyone in between.

Financial planning to the rescue

If the fear of running out of money is keeping you up at night, the first question we’ll ask is . . . ‘Do you have a financial plan?’

 

A plan is one of the best ways to conquer financial fears because it puts you back in the driver’s seat.

 

It solidifies your goals and places them front and center. What do you want your retirement experience to look like? How do you want to spend your time? These goals were likely your motivation for saving for retirement, so they should also be driving your spending.

 

A plan gives you a picture of where you stand, and it helps you understand how the amount you’ve saved translates into actually supporting your lifestyle. Once you know how much you’ve saved and how much you need to have the retirement experience you want, you have the freedom to spend within those boundaries without fear.

 

A financial plan should also include a strategy for how you will withdraw assets from your portfolio so you will have enough to support your day-to-day life without running out.

What if a financial plan is not enough to calm your fears?

Even after reviewing financial plans that clearly show that it is very unlikely that they’ll run out of money in retirement, we have had plenty of clients who still worry about spending.

 

Take, for example, the physically active retiree whose doctor told him that he needed knee surgery and had two options: he could either wait two years to get the surgery done in Calgary for free, or he could pay $15,000 to have it done in another part of the world right away.

 

The client’s financial plan showed he had more than enough to cover the cost. Getting the surgery now would mean that he could spend the next two years doing what he loves to do: biking, hiking, traveling. But still he chose to wait.

 

Why?

The psychology of spending

Despite the blissful picture of retirement you see on T.V. (think sailboats, rocking chairs overlooking the ocean, and endless rounds of golf), transitioning from your career to retirement can be a very stressful experience.

 

You’re unlearning lifelong habits of earning, saving, and planning because now you actually have to start using your nest egg to fund your lifestyle.

 

Andrea McTague, Founder of ShiftGrit Psychology and Counseling, sees plenty of retirees who are experiencing anxiety about money come through the doors of her practice. Many of her clients have spent their whole lives growing their wealth by carefully saving and investing. But when they stop working, they get what she refers to as a “scarcity complex” that makes them scared to dip into their savings.

What’s happening in the brain?

McTague explains that, in this situation, we’re dealing with two different parts of the brain. The part that handles executive functioning and thinks logically understands that their financial plan says they can take that trip around the world or buy that dream vacation home. But the fear of running out of money activates an entirely different part of your brain. This part is responsible for perceiving threats and reacting, often emotionally or impulsively rather than logically.

 

McTague says that part of the problem is that these two parts of your brain don’t always talk to each other effectively.

 

If your brain is perceiving a threat, your first instinct is likely not to logically evaluate the situation and arrive at the conclusion that it is not as bad as it seems. Instead, you will likely experience one of these three stress responses: fight, flight, or freeze.

 

‘Fight or flight’ is a familiar phrase that refers to  those survival instincts that kick in when you’re stressed and tell you to either stand up to the threat or run away from it.

 

But when it comes to your finances, McTague says that the first instinct is often to freeze. You know how much you have in your savings and investment accounts. Your financial plan tells you that you’re in good shape. Your wealth advisor says that you’re not going to run out of money. But you still find yourself worried about spending it.

How can you retrain the way you think?

McTague says that the first step is identifying the threat. Money is a minefield, but why is it triggering you specifically? Maybe you didn’t grow up with wealth so the fear of not having enough has been ingrained since childhood. Perhaps you have lost money in the past from an investment that went south or a business deal that went wrong.

 

Once you’ve identified the threat, the next step is to deactivate it. McTague suggests a gradual process of desensitization. If you rescue a dog that has an irrational fear of children, you don’t let your grandkids play with him the first day you bring him home from the shelter. You start by helping him acclimatize to you and to his new surroundings. Maybe then you bring him into the same room as your grandchildren. The next step might be to let them quietly pet him. And then as the dog gets used to interacting with them, they can begin to play with him.

 

The same concept holds true for us. Take the person who can’t justify spending $15,000 on a surgery, even if it would enhance his quality of life.. McTague would likely tell him to start small. Maybe purchase those hiking boots that he’s been eyeing, but that seem like a bit of a splurge.

 

It’s no wonder that going from a mindset of saving as much as you can to spending thousands of dollars all at once can cause some concern. But if you tackle that fear incrementally step by step, you will likely have a much more fun and fulfilling retirement experience.

Why is overcoming fear around spending so important?

Over our years as retirement transition specialists, we have learned that retirement is about so much more than money. The problem we’re talking about is not what you should do or shouldn’t do with your money. It’s what you should or shouldn’t do with your retirement.

 

You don’t want to look back over your golden years and regret the activities you didn’t do, the trips you didn’t take, and the small changes that could have made a big difference that you didn’t make.

 

If you want to make the most of your retirement experience, but fear is holding you back, we’re here to help! Sign up for our upcoming retirement seminar by clicking here.

 

To learn more about Andrea McTague and ShiftGrit, you can visit their website by clicking here.