It's Time to Spend Money!

The other day I read an article in the paper written by a financial planner about a fictional couple.  She was 64 and her husband was 74.  The article focused a great deal on how they need to continue to save money!  They already had quite a large amount in savings and owned a mortage free house.  It really annoyed me.

There was nothing about how they should go about spending their savings.  The average age of mortality is 78 and this guy is 74!  He may only have a few years left and they want him to continue to save money!  I'm not suggesting that people should rush out and spend all their savings; what I am suggesting is that there comes a time when spending your money (and enjoying what life there is left) just makes sense.

This is especially true if you don't have children.  We don't and a few years ago we decided to add a dream kitchen to our house.  I'm a serious cook and had been working in a terribly small kitchen for years.  We decided to use a Home Owner Line of Credit (HOLC) to finance the project, with NO intention of paying back the loan.  That's right; no intention of paying back the loan.  We essentially used the equity in our house to enhance our daily quality of life. It is 3 years since we did it and we are still enjoying the space every day.  We make the interest payments every month; that's all.  There is still a large amount of equity in the house and if we both die, our relatives would still inherit a good deal of money. 

Financial planning in retirement needs to involve a hard look at how much money needs to be protected for the future and how much can be spent now.  I'd like to see a few more planners recommending that people spend some of their savings while they are still young enough to enjoy it.

Selfishness

I am slowly developing a theory about aging that I don't really like.  In general I resist the notion that as people age they become cranky, hard to get along with, self-centred and rigid in their views.  Whenever someone tells me that they think that older people are overly self-focused I feel the need to point out that personalities don't change all that much over time (as confirmed by many studies in psychology).  It follows that anyone who is selfish later in life probably always was.

However, I am collecting anecdotal information on this issue and this has prompted me to question my defence of the elderly.  First of all, my husband has been fully retired for many years.  One of the most common views about retirement and one of the things that people say they look forward to the most is being able to "do what I want to do when I want to do it".  My husband certainly lives by this creed.  The bulk of his time is spent doing what he wants when he wants.  What I've noticed is that the more he has had the freedom to live this way, the more he wants to.  In other words, if there is something I want him to do (or something someone else wants him to do), and it doesn't perfectly align with what he wants to do, then we have a problem!!  Getting him to shift off his agenda isn't easy.  It stands to reason that if, in retirement, most people are able to indulge themselves doing what they want, there may be resistance to giving this up in order to please someone else.

The second phenomenon I've been noticing has to do with people my age who are trying to help their parents.  A youngish sales woman the other day told me that her parents live in a small town in Quebec and are reaching a point where they can't really manage a large house and property.  Her mother accepts that it is time to downsize and to perhaps move closer to their daughter in the city.  Her father doesn't see it this way at all and is extremely reluctant to sell, to downsize and to move.  Their daughter is a single parent and is trying to juggle fulltime work, being a mother, and also caring for her parents at a distance.  While she understands her father's reluctance, she feels he doesn't appreciate how hard it is for her to help them when they live two hours away.  He doesn't seem to be taking into account the impact of his choices on her.

I do believe that it is important in later life to be living in the place you want to be, but it is also important to appreciate the impact of your choices on your adult children who really want to be of help.  Decisions around where to live should, at the very least, take this into account.

Wills

I can't remember the exact percentage but about half of adult Canadians don't have a will.  Several years ago, my brother revealed that he and his wife didn't have a will.  At the time they had a daughter under ten.  I was shocked that they didn't.  I encouraged him to go and do it; he didn't.  I pointed out to him that if he and his wife died together, that their daughter would, first of all, become a ward of the province and secondly that she would inherit their estate at age 18.  Imagine someone at that age coming into considerable wealth at such a young age.  He didn't seem to be at all aware of the implications of dying without a will.

In the end, I decided to give him a gift certificate for $100 towards getting a will.  In Canada, a simple will costs about $250-$350.  It is such a small investment in such an important document.  He and his wife eventually did get to a lawyer and now they have both wills and Powers of Attorney in place.  It is true that in deciding to put a will in place does require one to think about death and dying.  As noted in one of my other posts, this is an issue that many people have great difficulty confronting.  Perhaps this explains why so many people avoid having a will.  My view is that, if your loved ones are at all important to you, then putting a will in place is a no brainer.  For a relatively small investment, there are siginificant dividends for your loved ones after your death.  And I don't mean in terms of wealth, but rather in minimizing the stress that comes with having to settle your estate at a time when grief is the greatest.