I’ll never forget this conversation. I was helping a client who I will call John, organize his various investments including; real-estate, companies he owned, investment portfolios. When I presented his statement of net-worth it totalled more than $85 million dollars. The client was scratching his head and said to me, I don’t think it’s enough. I asked him why he felt that way. He couldn’t offer any more details other than saying he had a feeling he would need more. I asked him if he thought he would run out of money? Again, no real clarity was communicated.
It appears that simply by asking people what their “Number” is triggers a series of emotional responses ranging from blank stares, to sheer terror. This makes no sense especially in the United States where during the second half of the twentieth century, more wealth was created than had ever before existed on the entire planet.1
So why are so many people insecure about their financial life?
David Krueger and John Mann in their book “The Secret Language of Money”, explain that everyone has a “money story.” They define a money story as “The subconscious tale you continuously tell yourself about who you are, what money means to you, and what it says about you. It’s a running dialogue about how much you deserve, how much you’re worth and how much you’re capable of (Chapter 5: Your Money Story).” In other words, we all have an accumulated set of beliefs about money, and these beliefs make up our “money story.”
Many of us are hard wired to feel insecure about money for many reasons. Perhaps there were messages communicated as children. Or maybe money started to become an issue when entering the work place, or perhaps money was the cause of relationship problems. It goes on and on. In fact, money can actually mask the real problem. How often do you hear someone telling you that they hate their job? I hear it from clients who can afford to make a change. Why don’t they? Fear of financial insecurity.
So here are three tips I’d like to share with you for overcoming fear about running out of money and having to move in with your children.
1-Stay present by being aware of the Now.
Dr. Michaelis, a NY clinical psychologist and author of Your Next Big Thing (our book review), offers the following insights:
When your body is in one place but your mind is somewhere else, you are absent. You can be absent in three different ways. You can escape the Now by going to:
- The Past- by compulsively rehashing events that have already happened
- The Future- by compulsively “spinning” about events that have not yet taken place
- The Elsewhere- by intentionally or unintentionally thinking abut events other than those occurring around you or within you, or by using external distractions or substances in order to exit the present.
Living in the Now is a deceptively simple idea. It means that where you are physically, you are also there psychologically and emotionally. Where you exist in body, you do so in mind and spirit- wholly, truly, fully- with every ounce of your being.
Can you think of a time when you drove your car via a route which you have driven dozens of times before? You get to your destination and can’t remember any details about the trip. It’s like you were missing in action, but miraculously you arrived safely at your destination. Like many of us, you may have been deep in thought; thinking about the past, or the future. This is not living in the present.
Often financial anxiety is triggered by one of these “mind detours.” Our mind loves to relive past stories, or manufacture future stories. We will never be able to completely shut down our monkey chatter. We can however, with practice, become aware when we are in the past or the future, and come back to the present. Shifting awareness to what’s going on in our lives in the present moment often reduces anxiety, a potential cause for financial insecurity. Seeing things as they presently are rather than projecting worst case scenarios is a good first step to living in the Now.
2- Living with purpose
Since money touches every part of our life, I believe if you find the purpose of your money, you may also find the purpose of your life. Man can live with extreme physical and emotional abuse. But man cannot live without purpose (read more at Man’s Search for Meaning).
Aligning financial decisions with your personal values is key to becoming happier about one’s financial life . George Kinder, often regarded as the father of financial life planning, has developed three profound questions to really get you thinking about purpose.
1- Assume you’ve got all the money you need- enough for the rest of our life. Maybe you’re not as rich as Warren Buffett, but you never have to worry about money for any reason. The questions is, what would you do with it? How would you live? Feel free to let your imagination roam. What would you do with it all? Think for a moment, then write down the answer.
2- You go to the doctor. The doctor discovers you have a rare illness. He says that you’re going to feel perfectly fine for the rest of your life. But, he says, the illness will prove fatal. The sorry outcome will occur sometime within five and ten years. It will be sudden. The question is, now that you know that your life will be over in five years, how would you live it? What would you do?
3- You go to the doctor. You’re feeling perfectly healthy. And again the doctor says you have a serious illness. But then the doctor says, ‘You only have twenty-four hours to live.’ What I want to know is, what did you miss? Who did you not get to be? What did you not get to do?
3- How much do you really need?
I recently cruised to Panama and toured the Embera Indian village. Spending time with the Embera tribe was like turning the clock back 200 years. The Embera tribe still live in traditional villages deep in the rain forest of Panama. They live in huts and hunt for their food. By our standards, they don’t have much on the material level, yet they communicate a great sense of joy, know their purpose, and live in the present.
As my wife and I spent some time with these people we noticed that the Embera Indians had a very interesting way of pricing their art work, which they sold to tourists: $1.00 for every day it took to create. If it took 10 days of labor, they priced it at $10.00. Simple. How much money do the Embera Indians need? Not much because of their ability to barter their goods and services among each other.
Our needs are a bit more complex.
I was once teaching a financial class to a group of retirees at the 92nd St. YMCA in NYC. One of the attendees raised his hand and asked me, “How much will I need to make sure I don’t run out of money?” I asked him “Tell me how long your going to live, and I’ll tell you exactly how much you will need.”
There are many factors which go into how much money we need including our life style and longevity.
In 2006, Lee Eisenberg wrote a book titled “The Number: What Do You Need for the Rest of Your Life, and What Will It Cost?”
Here’s a snapshot from his book.
But the above formula might be missing the point.
George Kinder says if income is your only focus, you’re simply trapping yourself in a never-ending cycle of acquisitions and you haven’t even taken a stab at figuring out what it would cost to do what you really want. To do this you need to focus not on income but on expenses.
So now it’s time to get the work done. How much do you think you really need?
1Krueger- The secret language: How to make smarter financial decisions