When Becoming a Millionaire is Not Greedy

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Our culture and ideals about retirement are shifting. Generation X and subsequent generations have been raised on the sidelines of watching their grandparents retire into pension-supported retirements, their parents either generating substantial wealth for themselves, or perhaps having varied career opportunities and being much more responsible for their own retirement. As Gen X advances in age, one thing is becoming clear for many: the responsibility for saving for the future is falling more and more on the shoulders of this group.

Yet here is where things get really tricky for many in America's middle class. Their identity may not be defined by reaching millionaire status. Yet this exactly where many will need to be in order to reach a comfortable place of retirement, or working by choice and not necessity. While there are many financial planners that can run the numbers and tell you how much you need to save to meet your retirement goals, there are few that are equipped to help you deal with the reality of what those numbers mean.

For many, while the idea of having a million plus dollars seems appealing, the other side of the coin is the felt responsibility that comes with managing over a million-dollar portfolio. Psychologically we often equate having more money with having more to manage. This means that we feel uncertain about our responsibilities.

The other challenge that we face when we are told we need to accumulate more than a million dollars is a few mathematical steps are often omitted. This is not deceit, but rather financial planners and other investment professionals take for granted their deeper understanding of how compounding interest works, and that is why we need such big numbers in the future. The logical brain of many people have a hard time conceptualizing the compounding effects of both saving and inflation. Sure they are terms that are thrown around a lot in the media, and financial press. But my experience says if you have not worked directly in the investment and money management world, the understanding of compounding interest is limited.

So there is both a real knowledge gap that must be crossed in order to help people understand the importance of getting to a million-dollar level. But there is also a major psychological gap as well. Often times the values of the middle class can reflect humility and a desire not to have so much money, so as not to appear greedy. Another dimension can be for different religious traditions in which excess money is to be avoided.

This is why the facts alone may not be enough to encourage you to accumulate an appropriate amount of money for your future.

In 30 years millionaires will not be the ones driving flashy cars and living in big homes. They will be middle-class folks with enough money to retire and afford the same standard of living to which they have grown accustomed. Saving a million dollars is not about being showy, but rather about taking responsibility for yourself, your spouse and your family. In our culture, where we pride ourselves on self care, it will take a large enough bucket to maintain our independence instead of having to rely on family members.

So even if you get to the place where you understand the need to accumulate enough money, has your spouse come to understand things in the same way? Having these conversations early and often is key to making it to the long term goal.

We Get Along Financially, Except

When I tell people that I am a marriage counselor that specializes in working with couples and their money, I usually get one of two responses. The first is diving straight into the details of their marriage and financial lives and some specific event that happened to them.

The other is a more cautious response. It goes something like, “We are really fortunate. We get along well on that page.” Then there’s a positive explanation about how good things are. As I listen for a bit, I acknowledge and say that is wonderful.

Recently I was talking with a doctor who thought my work was really interesting, and he said he and his wife get along well in that department. He went on to say “We are blessed”. To which I responded great not expecting much after that. Then came the exception, he said my wife thinks I have too much insurance. I think oh, is that so? Now this was a social setting so I did not get into the details, but this is one of many examples of what I hear once someone feels safe enough to share with me about their life. The reality is that we all have financial sticking points in our marriages. So the question becomes, are these sticking points driving a wedge into your relationship with your spouse? Is it affecting your ability to enjoy each other’s company?

Most couples can navigate a few minor disagreements, but stack a few together and the stress increases. The reality is that there is often both an emotional cost and a financial cost when it comes to financial differences.

In the case of the insurance for this spouse, it was a common source of tension. Even if for this doctor he is spending $200 a month in extra premium for insurance that is not necessary—that adds up to $2,400 a year. Peace of mind just became more expensive for this couple. But the bigger question becomes why is this insurable risk so important to the person?

Without knowing the details, we could assume that it was a disability policy that the doctor has. But the policy might not be technically necessary for a number of reasons. Beneath the surface the of that decision the doctor's father became disabled at a young age, and that memory lays in the back of his brain about the need for disability insurance. Perhaps this is not a connection that he has made, but it then becomes a clear explanation about his desire to have more disability insurance than would normally be reasonable. Further yet, the disability was caused by a motorcycle accident. The doctor does not even own a motorcycle and won't ride one. So does he really need this disability policy? Perhaps not. Hopefully this demonstrates that insurance policies can become about meeting more of an emotional need than a financial need. Yet if we remain overly-insured based on subjective needs, then we may be cutting off cash flow that could be used to allocate towards other important goals for the family.

Not In Our Family Finances

“Let's go to the zoo today,” Sally told her husband Dan. “The weather should be fine, and the kids will have a great time seeing the many different animals.” Sally and Dan get the kids loaded into the car and head off for the zoo. An hour later they are at the entrance to the zoo with their three excited kids in tow. They start off with high hopes and aspirations, but the trip quickly becomes an emotional nightmare. At the front gate Sally asks Dan if they can spring for the all access pass, which includes not only entry, but also the many different activities that are located inside. With a slight look of disgust, Dan looks back at Sally and says, “Oh fine.”

Sally and Dan enter the zoo with their kids ready to have a good time, enjoying looking at the monkeys, giraffes, and lions along the way. After a few fun hours the kids are getting hungry, and Sally and Dan are ready to sit down. The kids all clamor to get the souvenir cups with the funny animal heads, while Dan insists on just getting the kids the regular cups for drinks. As they all sit down for food the three kids look across to see the gift shop and start in with, “Dad we want—”…You know the rest of the details. After some persistence and after finishing lunch, Sally joins in with the kids and says, “Oh come on Dan, let's let the kids get a special treat.” To which Dan quips back “This whole day has been a special treat!”

By this time you are starting to get a picture of Dan and Sally's life. While this is a story about their trip to the zoo, the reality is that their pattern of interaction persists over many of life's situations. Sally wants to give the kids as many rich experiences as possible, while Dan seems like he does not want to indulge the kids in any of their desires. Reading this story likely evokes certain emotions in you.

What do you think of Sally? Why?

What do you think of Dan? Why?

What do you think of their kids? Why?

As you reflect on your answers to these questions, you will start to become aware of your own rules about the way that money is to be used in your life. Day in and day out you live with our spouse and you both have many unwritten rules about the way that you should spend, manage, and organize around money. This is called your family financial system, which is less about the actual amount of money, and more about who says and does what with the money. At a deeper level this is a reflection of the way that the family dynamics play out, and the way that the power is dispersed throughout the family.

Sadly there is often disagreement between spouses/parents about their financial values. The ways in which couples go about addressing these differences can vary, but the reality is that there is a big opportunity for couples to start to build financial intimacy in their life. Financial intimacy is being known at a deeper level about why we hold the values that we do. I surely work with many couples who can pretty easily predict their spouses spending patterns, which they take issue with. But at a deeper level it’s not the spending patterns that they’re upset with, but rather the values that those spending patterns communicate between spouses, kids, and their community.

Dan grew up in a family where he often heard from his dad, “Modesty is a necessity.” Which Dan internalized to mean that splurging beyond the basic experience is unacceptable. So with the trip to the zoo Dan felt as if he was betraying one of his family rules about splurging by getting the all access pass, fancy top lids, and then a gift from a gift shop—it was all too much.

On the other hand, Sally grew up the youngest of two girls. Even though her father earned a very modest living, he lavished his girls with gifts—even when he didn’t have the money to pay for the presents.

So now as Dan and Sally go through their married life, they continue to replay out the messages about money and how it is to be used in within their families. The reality of Dan and Sally’s finances is that they are in a financial position where they can afford to spend the "extra" money at the zoo—it won’t have a big impact on the rest of their family finances. When they slow down long enough to recognize the pattern they’re in and give credence to their own respective experience of living with their fathers and the way that they spent money, they will have a much better sense for the source of their frustration. This can lead them to find new ways of relating to each other that make sense for their family. But without taking the time to understand the connection between the past and present, they are doomed in the future to keep repeating the same problems over and over again.

Your Personal Boom Bust Cycle

In the economy at large, we go through periods of expansion and contraction. This is a known and natural part of Economics 101. Few like it when the economy contracts and turns down, we all have to live in the cycle of boom-and-bust. We would love to have an economy that grew at the same rate, year in and year out, yet that is not reality. Our economic system is vast and dynamic, with many moving pieces that lead the to the boom-and-bust cycles that occur. Yet when we look over time we can see an overall economic expansion.

So if we apply this same concept to our personal finances, what do we make of it? Through meeting with a number of different professions, I have discovered that people within their own family have boom-and-bust cycles of their own. These cycles do not necessarily correlate with the broader macro-economic patterns, but they seem to have a similar psychological effect—perhaps an even more profound impact because the individual experiences it personally.

For the point of this blog let's assume that people earn money in one of two ways. 1) Regular Basis (same amount): typically these are hourly employees and salaried non-bonus employees. 2) Variable Income: where much of their income is tied directly to what they produce. They can be entrepreneurs, sales professionals, contract based employees. These folks do not get a regular paycheck every two weeks or once a month. Rather they get paid based on a contracted basis.

So what does this do for families that receive variable incomes? They live with a higher degree of variability in their earnings. That level of uncertainty creates practical challenges like managing cash flow to pay bills, and also psychological challenges as their income and ability to pay bills are directly contingent on producing.

As you look at your own family economics

1. How does income flow through your home now, does it come in a steady stream, mild waves up and down, or in big waves with potentially big breaks in between?

2. How did the family you grew up in earn their living—was it a steady paycheck or uneven cash flow?

3. What was the perceived ability of your family to create, sustain, maintain, or grow financial security?

4. What was the variance in your families’ income?

5. Where there big swings week-to-week, month-to-month, year-to-year?

6. Did your families’ income remain relatively flat, grow as you grew, or decline?

7. Where there interruptions to income producing ability—perhaps a significant career shift, disability or death?

8. What emotions come to you as you reflect on these questions?

As we become more acquainted with the patterns of income we saw from the family we grew up in and the family we currently live in, then we have the opportunity to better understand the points of stress we experience. In our married life it’s especially important to understand how our spouse experienced their family cash flow, and what that meant for them as a family—the things they got to do, the things they did not get to do.

As you think about your life horizon and the planning process that goes on, there are a number of variables to consider. There are some questions that will get answered soon, and some that will remain unknown until further along in growth and understanding.

The personal boom-and-bust cycle often plays out when there are larger variances in family income. If mom earns a big bonus check what does the family do with it—new cars, vacations, clothes, charity—what happens? Then what happens after the money is spent?

What about those families where income expands and contracts on a regular basis—are they able to set aside enough in the boom times to even out life in the bust times? This takes the ability to look into the future and anticipate the bust times to come. A family without a future orientation, may be more subject to having to expand and contract life style as income fluctuates. What stress is that placing on you? What kind of stress is that placing on your partner?

I was recently working with a couple where the husband was not concerned about the home equity line of credit and said they would get it paid off, whereas the wife was very concerned about getting it paid off. Below the surface of their argument lie deeper personal convictions and money scripts that caused them to see the situation from two very different perspectives. This family had variable income from both partners. The husband earned a small base salary with the potential for a big bonus, and the wife was a small business owner and did her own consulting work, which led to variable income. This dynamic ultimately led to a level of uncertainty in the relationship about when and how the home equity line of credit was going to be paid off.

So what's your personal boom-and-bust cycle? If you don't receive regular income for any number of reasons, what is that experience like for you, your spouse, your kids and perhaps other people that count on you to produce an income?

Where are you in the cycle?

Do you often have a steep recovery to climb out of the bust, i.e. is there debt that has to be repaid?

If the boom-and-bust cycle is wearing you out, what are those things that you can start to change that would reduce the variability in the cycle?

Falling In Love With The Profession And Not The Person

You would never marry for money—or would you? You meet the special someone and they tell you about their line of work. You think to yourself, “Wow this person must have it going on! I sure would like to get to know them better.” You engage this person in fun, friendly conversation. Over time the relationship develops and you decide to get engaged to this amazing person. At the conscious level you are thinking, “ This person is smart, charming, seems to be doing all the right things. Why wouldn't I want to be with them”. In return they are thinking the same thing about you.

So the relationship progresses and you get married. You think you’ve hit the jackpot. You met this wonderful person and will spend the rest of your life together… Until one day you wake up and you realize, “Wow I thought I married this person because I love them and they make me feel so wonderful.” But things are not always as they appear.

There are some professionals that our society holds in high esteem—you know, those people who will get to live the good life: doctors, lawyers, successful business professionals, etc.  It can all seem like a wonderful windfall of good fortune, especially if you were not expecting to marry this type of person. But over time you realize what it looks like to actually live with someone who’s achieved that level of success.

Sadly, we often pursue a certain career or someone in that career, because we have an idealized image of what it would be like to become or be with that person. We can become blinded by our own idealism of being associated with that title. Okay, now I know by now you are saying who me, “I would never do that,” and maybe that’s true. But from my experience we all tend to romanticize certain types of people. If we are fortunate enough to meet and then "fall in love" with them, we are in for a rude awakening—they too are people, subject to their own faults and limitations.

Eventually you will hit this point of waking up from the idealized image of who you married, and see them for who they are. Then the hard work of the relationship begins. Sadly, this is when many couples bail out and say, “This is not who I married. What happened to that amazing person I met and fell in love with?” Well the sad reality is that we fell in love with an idealized image of the person, not the real person. But once we recognize this, then we can start to effect positive change in ourselves to learn how to love the person who we fell in love with.

At a deeper and often unconscious level, we have internalized money messages about what certain society positions should be able to provide us. There is often a period of disillusionment when we realize that this person who holds an idealized position is not as good as they seem. At this very juncture it is time to lean in and get to know the person behind the profession. They are likely neither as good or as bad as you might think.

Entering into this season of life can be challenging and overwhelming. If we put the position before the person, then the relationship remains shallow and unfulfilling for both people in the relationship. But given time, and often a bit of professional help, you can move to a place of loving the person behind the profession, and then ultimately enjoying the benefits of their position as well.

In my next post I will be looking at the effects of what I call the personal boom and bust cycle.

Written By: Ed Coambs – Marriage Counselor and Financial Therapist

Edited By: Joey Glass