Q: When And How Can I Indulge Responsibly?

If you could have a candid conversation with financial advisors who have decades of experience helping professionals, business owners, and families just like yours plan for their financial future, what questions would you ask? I'm Chip Munn, financial advisor, author, host, and CEO of Signature Wealth Group. For decades, my partners and advisory teams have had the opportunity to answer the tough questions for hundreds of our clients. Now we want to do the same for you. On the Signature Life Show, you'll hear answers to your burning and most perplexing finance, investing, and retirement questions from our Chief Investment Officer, Senior Wealth Advisors, Certified Financial Planners, and more. We aren't just financial advisors. We're parents, children, community leaders, and entrepreneurs with a passion for helping empower our clients to live life intentionally, what we call a Signature Life. John Tate, what's up, man?

Chip Munn, it is a great day because I'm talking to you and we get to teach people about whatever we're going to teach about today. You know, it's a teaching moment. Those are always exciting to me.

It is, and it's exciting to me because this particular conversation was brought about by a question that I got from a client. And so I said, you know, that'd be a good thing for John and I to talk about because I'm curious how you handle these situations. And so One of the cool things about this show, John, is our ability to take interesting questions that we get from clients and be able to talk about them in ways that other people can hear it. And I think that sometimes they're questions that maybe you wouldn't be comfortable asking. And in this case, I even went back to my office and talked to my partner, Scott Mitchell, and asked him the question. And so this is kind of what we're talking about today, John. So the question was basically, I've done my Signature Life Plan. I feel very comfortable in my day-to-day. I'm happy with the work I'm doing. I'm very comfortable with that, and I'm very comfortable with my long-term plan, what 20 years from now looks like. But now we're in a place where we're still accumulating money, and again, kind of as I was asked, I'm curious, how do you make the decisions of that $1,000 to $10,000 annual expense or one-time expense, those things that you might consider maybe a practical luxury or an indulgence. How do you make those decisions when you're comfortable in the short term and the long term? So how do you start to look at the potential of you're on track and maybe have more money than you expect? Good problem to have. But how do you start to use that money and make the decisions for doing that in your life? And I thought that was just a fascinating question to me. I have plenty of people that I talk to who are wanting to get confidence in the day-to-day. I have others who want to get confidence, let's say, in retirement, for example. I think a lot of folks find themselves in this in-between, either on a regular basis or a one-time basis. And so I thought it would be interesting for us to talk a little bit about how folks might look at the idea of, again, making some decisions on what we'll call either indulgences or practical luxury. What are some of your thoughts on that, John?

That is an interesting question. And I guess for us, when we're approached with a client who has a similar question, we tend to go back to the numbers and see what it means in the long-term sense and Anytime that we're talking about trading off money that could be used for anything for something specific, we ask ourselves, "What kind of personal fulfillment are you, the client, or your family, what is it that you're going to get from that purchase?" And maybe fulfillment comes from different places for different people. Maybe it's something they're spending money on, something that they can learn more about that they didn't know before, like wine or birds or kayaking or whatever it might be? Are they learning a skill that they can then use for the rest of their lives with other people? Are they spending that money to differentiate themselves from their peers? Is it an object, maybe a boat, and they can then go out on the water and take their friends out on the water because their friends don't have boats? So they want to be the person with that thing that sets them apart from their friends and allows them to do things with their friends that they couldn't do otherwise. Maybe it's that sense of fulfillment that allows them to express who they are or what kind of goals they have in their own life or what kind of vision they have for themselves and their family. Then people do get a sense of fulfillment from whatever they're spending that money on that has a purpose within the overall life plan that they've set forth for themselves? Does it tie into something else that I want to do later? And so spending that money today will get me to that later objective on track or ahead of time. So for us, we start the conversation with fulfillment and that feeling of, "I'm using what I've saved to make my life or my family's life align more closely with the vision that I have." in a long term. And it doesn't tend to come from just random products or places. Certainly, you and I both see clients spend money on impulses or things that just come up. And that's okay too. I'm not saying that's bad. I'm just saying you usually end up with less feeling of fulfillment or a shorter-term feeling of fulfillment when whatever you're spending on doesn't really have that sense of place in your overall plan. Do you get that sense with your clients as well? Or is that how you start the conversation?

At least I think a big part of it is just living life intentionally and being intentional. And the idea of the long-term plan is to have a direction for where things are headed. But you use the word, John, vision, that I think is important. There's an author that I follow, his name is Ben Hardy, and his next book is called Be Your Future Self Now, or some variation of that. And a big part of that, I think, at least from a concept standpoint, and we'll get into maybe some nuts and bolts of things to look at, but the concept is if you imagine what your future self would look like, then begin to do the things that that person would do now. And I think that that can very easily be applied to our financial situation. Let's say you've put together a plan. Again, I think that having the long-term plan and being able to meet your immediate budgetary needs are important. For even being able to kind of play in this sandbox. But assuming those are the case, then a lot of it is, what am I trying to do? What am I trying to facilitate? It's just a different level of that. Is it comfort and convenience? I think that's an area where for some people that's important. Is it building or creating memories? You mentioned being the friend with the boat. If you're the friend with the boat, holla at your boy, because I don't have a boat and I like boats. You know, they say the best kind of boat is a friend's boat. So maybe you could be that friend. But my guess is that really, to your point about that feeling, what's behind that is community and being with your friends and having a reason for doing certain things. And so it's the intentionality that can give value to what you're spending above and beyond. Again, I think that most people, at least for me, let me say it that way, for me it would be about experiences and it's a very personal thing, right? What's important is what something's worth to you. Doesn't matter what anybody else thinks. One of the more expensive trips I've ever taken was to the 2016 Clemson National Championship with my 3 boys. They were young, high school, middle school, elementary school, and we won. And I have a video of the last play and my boys in the stadium. And immediately afterwards, we were on the way back and one of my boys said, I want one of those t-shirts. My friend who didn't even go to the game already has a national championship t-shirt. And I said, well, let me tell you one thing first. We'll get a t-shirt. No doubt. I'm cool with swag. I said, but Bill Gates couldn't buy what we had now because with experiences and memories, once they're over, you can't buy them. No matter how much money somebody had, they can't go back and buy the experience that's already passed. But the key is that game, it cost me what felt like a fortune at the time. And my guess is that those tickets would have been worth next to nothing to you as a Tar Heel fan. You know, you probably don't even follow football. So, you know, it's one of those things that it just makes a big difference who it's for and being intentional. I think that's the key as we're starting to talk about some of these options for how to make these choices.

I agree with that, and I think you go back to what you intend to do. And I look back at my dad's decision to learn how to scuba dive, which is something that he was going to learn how to do it. And so I learned how to do it, and I was the only other kid in the family that learned how to do it. And so he and I would go scuba diving together. It was something we had— he got some fulfillment out of, I got some fulfillment out of, and it's something that I can't replace any of those memories with anything else. So it's something that everybody has, those things that they want to do or want to have as a part of their overall life, and that will be worth something different to them than it would anybody else. One of the other things that we look at when we're faced with these questions, I think I said it goes back to the goal plan and monitoring system that we use to create the cash flow scaffolding that we use to build these plans on. And there is that year for most of our clients, there is that year where they start spending more than what their portfolio is making. And so at that time, there is a crossover from the portfolio growing every single year in retirement to them starting to spend it down ever so slightly. And so when we have these questions of excess spending, would be $1,000 to $10,000 in any given year, anytime you add extra spending to the plan, you either create one of those crossover events if there wasn't one before. And we do have clients that no matter what they do, it seems like they're not going to reach a point where they start spending down more than the portfolio is making. And so, what a great situation to be in. But For most people, it does speed up that instance, that year when that crossover event happens. And so does that mean that they can or can't make that decision or spend that money? No, but I think everybody needs to have a conversation with— in their own mind, have a conversation with their spouse to at least make sure that everyone's goals are still aligned and having that extra risk, even if it is infinitesimal, even if it might not in the end make up a large difference in what they can either leave to their heirs or have as a buffer at the end to last them longer than the plan might. If they live to 117 years old, rather than an age younger than that, it might never come into play. But it is a conversation just to make sure that if you are spending down your buffer or you are spending down end-of-life assets faster than you had been spending before, bring in the family, bring in your spouse, have that conversation, make sure it aligns with everyone's goals and start there. It can make a difference on whether or not you end up feeling fulfilled or whether or not you end up feeling like you resent your spouse for spending that money and putting you in extra risk or danger or whatever it is. You certainly don't want any of those negative effects associated with the extra spending, right?

Yeah. I think Another part, because one of the things that came out of my conversation with Scott was the psychological aspect of if you spend the money, are you going to be happy that you spent it? Because you've got some folks who, if they spend the money, they can't enjoy it for kicking themselves for having spent the money. You know, to thine own self be true. When we talk about the Signature Life, this is it. This is where the rubber meets the road because One of the things that a lot of people struggle with, John, is wanting what they want. We are not talking about— when, as I thought through some of this, we're not talking about needs. One of the things that came up, and it struck me in the conversation with my client, was about what if you decided you only want to fly first class from now on? Well, as long as you can enjoy first class. I had heard a story one time and I shared it with her. It's like the guy who won't eat the snacks. On first class because he's on a diet. And it's like, look, bro, it's not the snacks in first class that are getting you. It's what you do every day. And I think that it's just one of those things that there are differences between periodic or occasional occurrences and what our habits are. But I think that in a lot of cases, I don't know one way or the other where it comes from, and it's different for different people, but we've been guilted into not wanting what we want. We're not talking about needs. We're not talking about whether or not we're going to eat. We're talking about whether or not we're going 5-star or Sizzler or Outback. I mean, you know, it's a big difference when we're talking about not needs, but wants. And I think it's important in going back to that word intentional, that as long as we're intentional and we've made a big picture plan for things, we gotta be okay wanting what we want.

Most of the clients that we have, we're having those initial conversations about you're in the early years of your retirement most of the time, or you're getting ready to retire, or you're still far enough along that you could make changes if you want to. But most people, I think, have a sense when they get to that point, they're ready to make the decision of, do I continue to work for a living full-time? Do I start to work less? Do I earn less? Do I flip a switch and start living off of what I have saved immediately? Most of the time, I think they have a good sense of where they stand when they retire, meaning I'm willing to trade off flying first class everywhere for the rest of my life if I can somehow start enjoying my life today and working less rather than working another 10 years and potentially using up some of my life in order to have that constant benefit of flying first class everywhere for the days that I have left. So there is a trade-off. We spend a lot of time talking about, "Okay, the answer is yes, you can retire, but it means this. It means there is this much to spend. It means you have this much left in the end. So there's that much of flexibility and leeway." Most people, I think, at that point, decide on that trade-off and what is more important, knowing that their needs are always funded or knowing that their wants are always funded. So there's some things that people kick to the side and say, "Well, maybe in my mind that was important then, but it's not important now. What's more important is getting to live life with my family, not have to feel like I have to get up and go to work every day and starting to do something different." That can sometimes be a luxury that maybe their parents didn't have. They weren't allowed to or weren't able to retire early or retire at 62 or retire before age 70. And so that might be something that they would have thought is a luxury because the idea of what a luxury is also changes over time. And like you said earlier in the show, even it's different to different people.

Chip Munn: Well, and just as easily somebody could take the other option, which is You know what? I want to be able to do more. So I'm willing to work a little longer, whether that's full-time or part-time or whatever, or to say, I want to be able to help my kids. Now there are all kinds of things you could decide were important to do that again, are not needs. They are again, practical luxuries, helping kids, being able to fly them out anytime they want to visit, or it could be a legacy. It could be gifting and being mission-driven and having things like that. And you could just as easily decide, I want to be able to do these things and I'm willing to work a little bit longer, even if it's part-time, because I like what I do. And that's a big part, again, kind of life design that we talk about. But one of the things that you hit on there, John, and I think that when we look at the big picture and start to shrink back, right, one of the things that we can do in a big picture plan is create almost an annual budget for these things to say, all right, we want to spend an extra $20,000 What would that do to the long-term plan? And provided that it works, then I think it's important to realize most of these decisions aren't irreversible. Like, all of them are something you can decide. If you say, from now on I'm only going to fly first class, but 2 years in you decide it's not that important, the snacks aren't good, whatever, or you're just not traveling very much, maybe that's not the thing anymore. But you've created a bucket of money, for example, that provides you with flexibility and choices. And I think that it's really easy easy for us to get into some black and white thinking and say, if I decide this for now, it's forever. And you could decide not to spend it. I mean, there are all kinds of things that are options. I think part of the spirit of the conversation is opening up to the idea of, there are some things that I want to be able to do now. How do I decide, or what are some of the things that I decide? And one of the best parts for a lot of people is the fact that it's not irreversible.

I think what you just said, and what I tend to tell people, is when in doubt, use us as a sounding board. I mean, we are nothing if not a group of experiences that we not only experience in our own lives, but we group together all the experiences of all the clients that we help. And so together we have all this information that people have asked us these questions before use us as a sounding board. Even if your question is new and unusual and we've never experienced it before, we have the ability to add in almost an infinitesimal number of different scenarios and options into the plan, and then narrow them down and X them out one by one, or keep them all in there and just see what happens and see which what-if scenario we need to go with, depending on what happens in your own life. We've got clients that will do both of those things. They'll eliminate or they'll keep them all. So we can be a sounding board for all of that. And I do think that what people use us for is not necessarily to be a yes man or a yes woman or a yes person, but to give them what we think is the answer that is in their best interest. And that's what we strive to do. It may not be the answer that you want to hear, but it's going to be the answer that we think is in your best interest that will get you to the end of your plan without running out of money or whatever your kind of overreaching goal is. This, right?

Yeah. And hey, it might be the answer you want to hear. That's part of— I mean, having the conversation. And I'll share, John, just a really practical and personal experience with this. And you know this, and some of our listeners might as well. Many months ago, I decided that about a month ago I was going to have gastric bypass. I had lived a handful of years that I didn't have really good control of things. I wasn't as healthy as I wanted to be, and I found myself in a position that I didn't want to be in. And my signature life was more active and my current life was more sedentary. And there were a lot of medical things that went into that. But it was a decision that I made that would I rather have this money or would I rather spend the money to have this procedure to extend, in my belief, my life? And when I go back and I do the math, because I did tons of research, You go back and do the math and say, it costs me X amount of dollars, divide that by how many months I'm now going to get to live and live the life that I feel like I want to. It's less than a Netflix subscription. I mean, it's not expensive. And that's another example, kind of an out-of-the-box example of using your money to be able to fund or build the kind of life that you want that isn't necessarily buying a thing or an experience. but it is providing hopefully longevity and quality of life. And so I think there are a lot of things that kind of fall in here. And again, for me, John, one of the cool things you mentioned about being able to be a sounding board is to be able to take these questions, and for us having different perspectives and client experiences, to be able to kind of bounce them off one another and have a conversation that hopefully for people is helpful as they process what's part of their signature life.

That's right. That's why we're here. I mean, these are the kinds of questions that makes doing this show interesting, at least, and keeps us both engaged, I would think. Hopefully it adds some benefit to the client that asked the question.

Well, I'm sure that it will. I look forward to sharing it with her. And speaking of looking forward to things, John, I look forward to doing it again next week, brother.

Yes, sir. Same bat time, same bat channel.

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