How Much Is Enough?

Balancing Today's Needs with Tomorrow's Retirement Goals

Diane McCurdy

• Publisher: Wiley
• Year: 2013
• ISBN:
  9781118493663
• Edition: 1
• Topic: Personal Development
• Subtopic: Personal Finance

The numerical and emotional aspects of planning for retirement

This hands-on resource demystifies financial planning by giving the Enough number: an exact figure specific to personal goals, which can be a target number to aim for in retirement. It shows what changes will help to achieve the number, and offers an understanding of hidden motivations when it comes to spending money. It also provides an overview of the multitudes of investments available and provides conservative guidelines that will help make money, save taxes, and sleep at night.

• Offers a clear understanding of the different attitudes toward money and includes strategies to achieve goals
• Includes the tools needed to save for later and enjoy rewards today
• Contains a method for tracking money to help get your finances where you want them to be
• Covers the details of what it takes to work effectively with a financial advisor
• Written by Diane McCurdy, a noted financial planner, speaker, author, and founder of McCurdy Financial Planning

This hands-on guide walks you through a proven program that is designed to keep you on the right track to financial success.

Part One

What Is Enough?

In over twenty-five years as a financial planner, I've learned one major fact about human behaviour: people don't change easily. They'll only change if they really want something.

1

Your Money and Your Life

I yam what I yam and that's all that I yam.

—Popeye the Sailor Man

Money doesn't come cheap. It's wound up with our emotions in ways we seldom notice. We trade our time and energy for it, keep score with it, build with it, control others with it and indulge ourselves with it. Then we fantasize about having more. Some people's self-esteem rides on how much of it they have—or how much of it they can make others think they have. Some have trouble parting with it—if they spend it on something, it's no longer there helping them sleep at night! Some people believe they need money to buy the affection or respect of others. Others use it to protect themselves from pain, or to cause pain to others. People have lingering feelings of shame because as kids they had so much less, or more, than others. There are those who consider themselves bad people if they care about money at all. Money is power. Money is glamour. Money is happiness . . .

I've got news for you. Money is just a tool. All that other stuff is what we put into it: fear, greed, envy, pride, anger, respect—that comes from us.

When Sue dragged Graham in to see me she was convinced that their finances were out of control. “How are we going to save any money when he keeps giving it all away?” she groaned. Neither she nor Graham had any idea how much they would need to retire on, so she wanted to put away every cent, just to be safe. As far as Graham was concerned, they had lots of money—certainly far more than either of them had grown up with—and as the son of a minister, he had always felt compelled to help others. That was why he had become a doctor. The money that went with the job gave his benevolent impulses new expression. As well as the charities and foreign foster children he supported, he had even been known to help out patients who were hard up.

Sue couldn't stand it. To her, having money meant just that: having it. She had grown up with even less than Graham, and she wanted to protect herself against ever being that poor again. After paying the monthly household expenses for a family of four with a mortgaged house, she wanted to save and invest anything that was left. Graham wanted to “give it all away.” This conflict about money became an ongoing tug-of-war that threatened to end their marriage.

That first visit from Sue and Graham brought home to me the two important points that underlie this book. First, only when you know how much is Enough can you feel confident that you're on track and know what you have left to enjoy. Second, money is an emotional subject. People have deep-rooted attitudes about money, and their own attitudes have to be taken into account if any financial program is going to work for them. Let's start with the second point.

For Sue the only real security was money in the bank, and even with the pile of money that the couple had built up, she was anxious that it still wasn't Enough. That nagging thought made her resent Graham for what she saw as his lavishing money on strangers. But for him it seemed a shameful waste to have money sitting around in a bank account when any number of people and agencies were crying out for help.

When the two of them argued about money, neither realized that they were arguing about something far more profound than facts and figures. Neither one understood that the other's way of handling money reflected a deep emotional need, and to deny that need was to make the other feel insecure and unloved. When I met these two, my first job was to help them understand that—and understand each other.

In my work, I see four common attitudes toward money. None of them is right or wrong, better or worse than the others, but each can lead to trouble if it's not balanced. A person's ingrained attitude to money is not going to change, so it's essential to build a financial program around how each person feels about this pervasive fact of life. Let's begin by finding out what your attitude, or “type,” is. For each question in The Attitude Quiz, below, write down the letter of the answer that most closely corresponds to your own point of view for each question. At the end you'll see what type you are, and where your personal pitfalls lie.

The Attitude Quiz

1.

A. Shopping is my favourite sport.

B. I shop when I need something.

C. Shopping can be fun sometimes, especially if I'm shopping for other people.

D. Shopping is torture.

2.

A. Credit cards allow me to have what I want without worrying if I can afford it.

B. If I can't afford something but it's an investment, why not use credit cards?

C. I give my kids credit cards to teach them the value of money.

D. Credit cards are a good way to build up a credit rating and a handy alternative to carrying cash.

3. When I go out for dinner with friends:

A. We check out the latest hot restaurant and we split the bill evenly.

B. Sometimes I pay, sometimes they pay—it all works out eventually.

C. I usually fight for the cheque.

D. We ask for separate cheques.

4. If I see something I like I:

A. buy it;

B. buy it if it fits into my game plan;

C. get one for me and one for somebody else if it's a good deal;

D. usually talk myself out of buying it.

5. If I won a big lottery I would:

A. never have to think about money again;

B. use it to create something important;

C. spend a lot of it on friends, family and charities, but keep enough to live on;

D. make sure my family was taken care of, pay off the mortgage, then live on the interest.

6. If I don't have any money in the bank I:

A. use my credit cards and line of credit—isn't that why they're there?

B. use credit to leverage opportunities;

C. worry that I won't be able to fulfill people's expectations of me;

D. get anxiety attacks (or I would if that ever happened).

7.

A. I don't know where all my money goes.

B. I always have a pretty good idea of how much money I have available, but never let that stand in the way of a good idea.

C. Most of my money is allocated to family, charity or trying to make a difference.

D. I keep close track of all my bank accounts and investments.

8. I love to use my money to:

A. enjoy life to the fullest;

B. follow my interests and stretch myself;

C. make other people happy;

D. build up a nest egg.

9. When I go shopping for something I need I:

A. usually come home with a few extras;

B. find it, buy it and go home;

C. look around to see if there's anything I can pick up for anyone else while I'm out;

D. shop around to make sure I'm getting it for the best price.

10. When I give to charity I:

A. give to the ones that appeal to my heart;

B. choose charities that most closely match my aims and beliefs;

C. give as much as I can because others need it more than I do;

D. allocate a specific amount to the charities of my choice.

11.

A. It's important to get a new car every three years.

B. If you buy the right car, it's a good investment.

C. Cars are incredible timesavers if everybody in the family has one.

D. I take really good care of my car to make it last.

12. When somebody has a new car I ask:

A. Did it come loaded?

B. What kind of car is it?

C. Are you happy with it?

D. How did it rate in Consumer Reports?

13. How do I allocate my retirement savings?

A. What retirement savings?

B. My home/business/hobby is my retirement plan.

C. My financial advisor takes care of all that.

D. Carefully. Very carefully.

14. When I go on vacation I like to:

A. pamper myself;

B. get some use out of the trip;

C. take lots of friends or family with me;

D. see how cheaply I can do it and still have fun.

How Did You Score?

What does money mean to you? It's helpful to know because any of these attitudes taken to the extreme can sabotage your dreams. Find out by adding up the A's, B's, C's and D's you have: the category in which you have the highest score is your type. You probably won't be one type exclusively, but one attitude will likely prevail. Once you know which type or combination of types you are, you'll have a better idea of why you spend money in certain ways, and you'll also be able to see patterns in your wish list, once you get to that part.

A) Spender

Motto: You only live once.

Dead giveaways: new car, latest gadgets, vacations paid by credit card

Spenders are very current. If you want something, ask one. They'll know where to get it, how to get it and probably the best deal on it. They're forward thinking, fun to be around and often the envy of their friends. These are the fabled Joneses. If you walk into a house that has the best and the latest of everything, especially when the owners don't use it all, you're in a Spender's house. Spenders like money for the things it buys. They'd rather have something concrete than something abstract like savings. It doesn't have to be an object. It might be courses, or travel or restaurant dining. Spenders also tend to see shopping as a form of entertainment.

Danger zones: Spenders get into trouble when they spend everything they have—or more. Of the four types, they have the hardest time saving money. If you're a Spender and don't pay off your credit card bills every month or have a permanent line-of-credit debt, you could be on a slippery slope.

Attitude adjustment: Once Spenders buy into taking savings and expenses right off the top and having all the rest to spend, they're on their way.

Famous Spender: Elton John. This man is probably the world's champion shopper. In 2000, he admitted that he'd been spending over $2 million per month for the previous two years—a total of more than $50 million in two short years. In one trip to Versace in Milan he spent $600,000. That was a leap even for him—$600,000 is usually the monthly total on his credit cards. But it wasn't his personal best. He's reputed to have spent $1.1 million in one day. Two truckloads of personal possessions accompany him everywhere he goes, no matter how short the trip. It's a good thing for him that the world's airwaves are clogged with oldies stations playing his songs and paying him a couple of cents in royalties every time they do, but even with that river of money coming to him, he once came within eight weeks of going broke.

B) Builder

Motto: Make it so.

Dead giveaways: midnight oil, own business, expensive collections, big projects

For Bu...

Table of contents

• Cover
• Title Page
• Copyright
• Preface to the Third Edition
• Acknowledgements
• Introduction
• Part One: What is Enough?
• Part Two: Getting Enough
• Appendix: Financial Planning Professional Designations
• Index
• About the Author