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How to enjoy more of your money right now

Here's a familiar saying most people have heard of: “You can’t take it with you when you go.”

But have every really thought about what it means?

While it’s noble to want to leave your children a healthy inheritance, Bill Perkins, author of Die with Zero: Getting All You Can from your Money and Your Life offers a different perspective. “First of all, yes, you can certainly leave money to the people and causes you care about,” he writes. “But the truth is that those people and causes would be better off getting your wealth sooner rather than later. Why wait until after you die?” 

The ‘warm’ bequest

It's an interesting perspective and one that is growing in appeal to many older Australians. “Early inheritance”, or advancing part or whole of any inheritance to your children or grandchildren while you’re still alive, is becoming increasingly common. How’s this for macabre: it’s known as a ‘warm’, rather than a ‘cold’ bequest…

The thing is, with Australians living longer than ever, a traditional inheritance may not be passed onto the ‘kids’ until long after they’ve reached retirement age themselves. The warm bequest is therefore made to provide financial support at a time children are more likely to benefit from it. 

Think paying off the children’s mortgage, helping them build a property or investment portfolio, privately schooling the grandchildren, or simply because parents know that gifting the money sooner will provide more of a financial leg-up.

Bear in mind that there are tax implications for breaking out the inheritance early, so get professional advice before you start playing Santa.

The lifestyle you deserve to become accustomed to 

Remember, too that Santa isn’t just for kids. Perkins points out that rather than spending money more freely as we get older, the opposite seems to happen. There is often a general reluctance to spend money on upgrading, or even just maintaining, lifestyle choices. We let opportunities pass us by for fear of squandering the nest egg we’ve built up. “Squandering our lives should be a much greater worry,” writes Perkins.

It's true that we spend so long in the wealth accumulation phase that switching to the decumulation (or enjoyment) phase can prove challenging. This is especially true during uncertain economic times – but remember that no matter what the market is doing, all times are uncertain. For this reason, balancing expected investment risk with lifestyle goals isn’t easy.

One of things a good financial planner will help you work through is changing your scarcity mindset to one of abundance. A scarcity mindset means you focus on limited opportunities, options and resources available to you. An abundant mindset switches this focus to what you do have – enough money for XY and Z and probably enough to share as well. It’s very challenging to work through the psychological barriers between these two mindsets, but here are a few tips to get you started.

1. Know your goals 

How will you ever know if you have enough if you don’t know what ‘enough’ looks and feels like. You need to know:

  • what your basic needs are now
  • how your needs may change in future (for example, as we age, this often includes additional healthcare costs)
  • layer on your ‘everyday’ wants (this might be eating out a few times a week, designer clothes, etc – whatever floats your particular boat)
  • top with your ‘big lifestyle’ dreams (annual travel or a holiday home, for instance)
  • add on any support you want to give to people or causes

2. Know your finances 

To feel confident you’ll have enough to comfortably fund the lifestyle you want, you need to know your numbers. That means taking inventory of exactly where you are at right now, then running different future scenarios to find your comfort level. If you’re not a numbers person, find someone who can crunch the scenarios for you. 

3. Take small steps

You don’t have to launch from frugal to fabulous overnight. Start small and gently ease your way into spending more. It might be a more luxurious holiday than you would ordinarily take that gets you out of your rut. Or loaning your grandchildren a set sum to start an investment portfolio that might provide them with financial security throughout their life. Pick a single opportunity, run the numbers, hit launch and then assess how you feel.

As always, seek the advice of a financial planner, who can tailor a strategy to suit your exact needs. Whether you plan to make an early bequest, or simply want upgrade your lifestyle, it’s definitely worth enjoying more of your money now rather than leaving it for someone else’s later.