Ep. #145 - Why Rich People Still Feel Poor

[00:00:00] Adam Werner: Hi everyone, and welcome to AB Conversations, where we will help you CFP your way out of it. A podcast where you get into the minds of a couple certified financial planners on how we think and feel about everyday financial planning questions, and what should really matter most to you. A healthier financial life starts now. 

Hey Ben. 

[00:00:30] Ben Haas: What's happening? 

[00:00:31] Adam Werner: How are you? Fantastic. Here we are again recording a podcast. Our favorite time of the week. 

[00:00:37] Ben Haas: Yes, I agree. 

[00:00:42] Adam Werner: I guess we'll lean in. So this topic today, you know why some, I'll use air quotes, rich people may still feel quote unquote poor, comes a bit from our last podcast, right? Who wants to be a Millionaire? And we were talking through a lot about million dollars isn't what it used to be. 

Right? All the impacts of inflation and time. And just kind of driving home that point for a lot of people defining is if a million dollars isn't enough in a lot of situations, then what is enough? And we can take it to the extreme where anecdotally, you know, we talk to a lot of people with with wealth, right. Have done the hard work of saving and yet they don't feel secure. They don't feel like it's enough. Even though by many metrics and by many people would see that and say how do you, how is that not enough? So it really just comes down to, I think for a lot of people it's defining what is enough. 

But there's some thought process to kind of go through. it really is just a lot of the psychological component of just dealing with money. 

[00:01:48] Ben Haas: Yeah. So let's just share some of our conversations with that. And it is, I like the way you frame that. It really is kind of this like paradox where you're, you used the quote, so I'm gonna, I'm gonna lean into it, too. You're rich, right? You have this wealth, but there's still just a lot of anxiety around money, right? And we, we deal with this stuff all day long. Mm-hmm. So we know that money is really supposed to be this tool that lets us live this life we wanna live. 

Right? It's meant to bring freedom, however you define that. Right? That's part of the enough, is it freedom of time. Freedom from stress around money has to be part of that. But there still just are these, I think, very common causes to what puts people in this camp. So I'll throw one out there. I think it's pretty common that just because you have more money doesn't mean the problems go away. 

'Cause typically people start to elevate their spending to kind of match what they're making. Mm-hmm. Right. Whether that's for show, right? It's now a bigger house, it's a nicer car. You know, we put in a pool. Those higher bills though probably then come with this pressure to maintain that. So I think part of the rich, but anxious paradox is somewhat self-induced by just lifestyle creep. 

[00:02:58] Adam Werner: Oh yeah, for sure. For sure. Yeah. It's the whole, you know, keeping up with the Joneses, right? Everybody knows, in theory, that's not the greatest path forward, but it's peer pressure, right? It's the human nature of wanting to fit into a group. 

So if you are elevating the group that you're affiliated with, then you will do the things that the other people in that group may be doing, and it's so natural to kind of tie your own definition of, you know, enough or, you know, your satisfaction with your financial status in life to just compare to those around you. 

You know, I'm just gonna rank myself to others, and if I'm above that, then I should feel good. But that's not a good way of kind of approaching things. I think the other aspect of this is too, just again, that human nature of, okay, I've accumulated this, I've built this. And now I, if I saw it go away or, you know, severely dwindle, that would hurt even more, you know, than just not having it in the first place. 

So just that fear of losing what you've built can lead to some, and again, we've had these conversations. I see it in people, I'll say parts of family, right? Older generations that just won't spend money because that's how they evolved, right? We got to this point, right? By saving and being frugal, I can't flip that switch to now just want to spend money. 

That mindset shift is so difficult. 

[00:04:29] Ben Haas: Right? So that wide range that we're just talking about there is why I think we're saying, I think this paradox is kind of normal. So, let's take it to that next step then let's dig into why this idea that of wealth that does not alone create peace of mind. And I think part of where we can start is just to use a little bit of analogy and we'll define this as marginal utility in a second, but, if you think of money as like a ladder, those first few rungs that we're like walking up, that's all the essential stuff, right? It's housing, it's food, it's healthcare, it's safety, right? You taking those steps up has a huge impact 'cause you're creating this base that is supporting you. That middle rung though, they may solve some of those, like next layer of problems, I'm paying off my debt, I'm stable. 

But the higher rungs. It's less and less happiness. Right? And studies show this, the more money you make, at some point you hit a level where more money does not lead to more happiness. 

[00:05:25] Adam Werner: Right? Yeah. You called it diminishing marginal utility. Is that's the technical term? 

[00:05:30] Ben Haas: Yeah, in finance. 

Yeah, behavioral finance. Like how you think and feel about it, diminishes. 

[00:05:36] Adam Werner: Yeah. It's like, and in my head it's like the law of diminishing returns where more and more just has less and less of an impact, which makes sense, right? You, that whole ladder analogy is, you meet your needs, you get a little bit higher, you get a little bit higher, you get a little bit higher. 

But at a certain point, if all of your needs are met and a lot of your wants are met, then what? Then it is that kind of, maybe I'm feeling unanchored for what really matters, which I think is a lot of what people struggle with. It's just the difficulty of maybe living, or thinking a certain way of just what other people are expecting from you and not just really kind of figuring it out on your own. 

But then I guess another example to kind of get into there is, and again, we've seen this, it's that, that scarcity mindset. And it doesn't matter what they're starting with from a dollar standpoint. Right? Right. Because it is, it really is situational and it's all about perspective. But just draw the scenario of a couple in their late sixties, they have $4 million invested. 

They have no debt. Reasonable expenses, we're saying 150,000 of expenses. So based on a safe 4% withdrawal rate from their $4 million. Financially they're in the top 1% of retirees. Yeah, that's great. But they won't travel. They will hold on to an older vehicle. 

[00:07:00] Ben Haas: Sure. Right. 

[00:07:01] Adam Werner: They'll obsess over, you know, the nickel and dime expenses or fees. 

You know, I'm thinking of a client situation from years and years ago where easily could have solved some life inconveniences with a couple hundred dollars, but wouldn't do it because it was a couple hundred dollars, right? On somebody with a few million. Just not being able to kind of get out of their own way in, in that scenario. 

But, you know, checks on their account balances or their investments on a daily basis is affected by market movements where, again, from an outside, standpoint looking in, people would think, what is wrong with this person? They're driving themselves nuts and they don't, and they're in a great spot. 

They have that flexibility. In theory, we would say they are financially bulletproof, but living in a way that does not align with the reality of what maybe we would see or some outside people would see. 

[00:07:57] Ben Haas: So that's why it's so important, like if we're gonna shift now to talking about how we try to help people like this, let's be clear, like starting this conversation, we are not to be judgmental, right? 

How you think and feel about your money is what matters most. And we need to meet you where you are, right? So whether you have a lot and feel like you have a little, or you have a lot and you feel like, oh my gosh I've let lifestyle creep come in. You know, I feel that from time to time when Amazon packages keep showing up on my porch, like, what are we doing here? 

The whole point is that we need to like all come together to start at the most important spot. And that's defining enough, right? Because if you don't go through the process of defining what is enough for you, then you're probably always gonna be chasing more or to the point that you just made, you're always going to be feeling like, yeah, but is this enough? 

Am I sure this is enough? We had a bad mountain in the market, like you said. Now I definitely don't have enough. Right? So it's not to be judgmental. Let's just talk about how do we help you define what is enough? Then what do the conversations look like that maybe we try to help people focus on the things that are more internal and not external? 

[00:09:08] Adam Werner: Yeah. So the first thing that popped into my head there is just in the area that we're in, there are a lot of, I'll say prudent, frugal, dutchy individuals, 

[00:09:21] Ben Haas: Pennsylvania, Dutch, just say it. 

[00:09:24] Adam Werner: Where it's that mindset, right? It's just hard to get out of your own way. Right? The, it's that definition of enough will just, there, there isn't such a thing, right? 

It's that, well, I will butcher this every single time. It's if some is good and more is better than, too much is just right. Like I can't go wrong if I have so much in front of me. It just gives me flexibility and that is absolutely the case, but we wouldn't want that to lead into inaction or at least that money not serving a purpose, right? 

Giving meaning. 

[00:10:01] Ben Haas: But then here's maybe the point and like we're financial advisors and we're gonna say this, enough is not a number. Enough needs to be tied to the freedom that it's giving me in one way, shape, or form, or the experiences that it's giving me, or the conveniences, as you said, that I can spend a couple hundred bucks and have somebody change my oil so that I'm not on my back at 75 years old doing this underneath the car and then having to get rid of that oil. 

I might have struck a cord there with somebody and I apologize. So the whole point here is that if we're gonna define enough, like let's not use this as a net worth, an income, your possessions, it has to be more of the internal feeling of, okay, I have time of freedom, I have joy. I'm aligning my wealth to things that serve me. 

I'm living without financial fear. And I realize, I mean, we'll talk here in a second. Like there are some planning things we need to do to make sure that you understand that the numbers like kind of check out. But us regurgitating market information and historical data and all this financial information, that's probably not gonna help somebody. Enough has to be more of the internal wealth, how I feel about it than number crunching. 

[00:11:10] Adam Werner: Yeah. And I think, you know, that's part of, I think the struggle is just the generational differences on just how people approach money and the psychological, the emotional component. Right? Going back to some of the older generation, the Pennsylvania, Dutch in this area, the emotional aspect, the psychological aspect is just not, it's not the primary. Right? 

It's not the driving force. It's, I'll just it's very secondary. Right? I don't want to think about the touchy feely, I'm just gonna do all the right things financially, everything else will kind of fall into place and I'm fine. But yeah you said it, right? It's any amount of data may not change that person's mindset. 

So we kind of have to use different language. Right, right. Yeah. Maybe get away from more of the financial impact and try to steer the conversation more towards that emotional, the behavioral side, just using different words, just talking about security, talking about freedom, talking about choice and flexibility. 

And then maybe augment some of that conversation with some scenario planning. Sure. Great. Try to try to, and we've done this for some clients, right? Just any number of negative outcomes or depending what the person is concerned about. We've had one that, or just any, I'll say retirees in general right now. 

If I have a pension and I'm worried about, you know, the solvency of that pension, what happens if that income goes away? And in that scenario, if I'm worried about that, then maybe I'm not gonna touch my other investments because I'm worried about this one thing. Yeah. But if we can illustrate, okay, if that happened, we still think you're going to be okay, and here's why. 

Hopefully we can start to build some momentum and build some comfort that what they have may be enough for their situation. 

[00:13:12] Ben Haas: Right, and I think bringing those two things together is the point, because while it's very easy for us as financial professionals to create these benchmarks, right? Your asset allocation, your rate of return, the income the net cash flow, right? 

All of those things we can track financially, we can't or haven't really normalized the process of creating like qualitative benchmarks, right? How are you feeling? Are you energized by this? Is you giving money away now fulfilling you in a different way, so, it really is our job to combine these two things and make sure we're having check-ins. 

We're having meetings that are checking in on that part of things. Not just, Hey, market's not great, or, Hey market's great. Well what, but what are we doing with that information? 

Right? 

[00:13:59] Adam Werner: Right. Well, yeah and I guess. Then how do we actually kind of put some of that into practice? And I know you've brought this up on, on past podcasts and we've started to implement this with some clients, just the idea of building like a spending bucket, right? 

The call it the fun account, the spending account, whatever that may look like, but a separate portion of their finances, where their job is to spend those dollars or to give it away, right? Use it or yourself or use it on somebody else. But the point is. Use it. Right? Right. Because we, we don't need to continue to accumulate it. 

[00:14:33] Ben Haas: We need to reframe for this, not from like, Hey, what if something goes wrong that needs to become, oh but what if nothing goes wrong? And now you had all this money and you never spent it or gave it away that then what? Yeah, we, let's go to the opposite end of the spectrum. We do need to normalize that idea of spending, right? And some of that I know our job, like we're not a doctor here. And I know, I've used this analogy before that if you had to go to the doctor because you thought something was really wrong with you, Adam, like, and that doctor walks out after all this testing and you're like sitting there in the chair waiting for what he's gonna say for him to just come out or her and say to you, you're gonna be okay. 

Carries a crap load of weight. Right? Do you really need him or her to go through all the different testing that was done? And I've had all these years of medical schooling and I know, and I've seen a million patients like you and give you all the jargon that's out there. No, all you needed to hear was you're gonna be okay and boom. Now you feel better. 

[00:15:30] Adam Werner: Yeah. 

[00:15:31] Ben Haas: I know We don't necessarily have that power. But I do want us, as advisors and hopefully trust in relationship with our clients, that we can walk into a situation and go, we've seen a lot of this, we've run all the numbers. We know what's important to you. You can afford to do this. 

And if that's as simple as taking a couple thousand dollars, putting it in that account saying now we're gonna judge success by how little's in there. Then please just spend it, right? Because we're trying to get the anxiety away from the wealth, right? Yeah. 

[00:16:02] Adam Werner: Yeah. 

[00:16:02] Ben Haas: And I think that, that paradox. 

[00:16:04] Adam Werner: Yeah. Yeah. And just hopefully we can help people just con connect some of those dots, right? The connecting their wealth to what actually gives them some satisfaction or fulfillment or meaning, right? It's spending on experiences or causes there they believe in or just going back, you know, their, their own personal wellbeing and just comfort and convenience. 

I mean, you can take that to the extreme. But for many people, and again, we've seen this, where people have the means to elevate their, I don't wanna say elevate their lifestyle, but to eliminate some of just the minutia of irritants, financial irritants in life. Like I'm at that point where, for me, these are much smaller numbers, but I'm happy to go spend $50 if it's gonna save me some time and just save me aggravation moving forward rather than just running into the same stumbling block over and over, which was always my mindset, right? I'm not gonna spend $50 because I need that, those dollars elsewhere. But it at a certain point that comfort and convenience has a value in life. And if you have the means to do it, we would encourage people to make their life a little bit easier if they can. 

[00:17:19] Ben Haas: And that still just all comes back to on the front end of a planning process. Or if you're out there and like you've been doing this yourself, or you're not really sure where you are in all of this, all planning, like we call it a statement of financial purpose. All planning really should start with, well, why does money matter to you? 

And that's gonna help us help you define what enough is so you're not chasing in an ideal world. Right? We're not chasing any more than that. We say this with taxes, right? In an ideal world, you file your income tax return and you get $0 back. Right? You hit the nail on the head. It wasn't too much withheld and you don't have to owe too much. 

We wanna look at your like net worth and what that needs to do in your life for as long as you live in the same way. Let's hit the nail on the head of you had just enough that you were happy, you were able to use that to serve you in the way that you wanted to serve you, but it's not like, unless this is a key thing for you you can't take it with you. Right? Right. So, just a, maybe a summary on we have to define you enough at the front of the process here. 

[00:18:26] Adam Werner: Yeah. Which I think for a lot of people is that's difficult, but it's why we're here to help facilitate that conversation. And you said it earlier, right? We've been doing this a long enough time to have a lot of experience having these conversations and seeing enough different situations to feel fairly confident to give that feedback. Going back to your doctor analogy to just look at somebody's situation and say, you're gonna be okay. And hope that, that actually drives the point home. 

[00:18:57] Ben Haas: Right? Because here's the other secret. We know this, that a lot of high net worth people become very prideful of that, right? 

So they maybe avoid talking about certain fears or it takes a little bit of vulnerability to then open up to go, you know, I think about this more than I know I should. I know you tell me Ben and Adam don't look at my investments and I know I shouldn't worry. I'm diversified. Yeah. You know, they're not gonna tell us that unless we keep asking the questions. 

So normalize the conversation. 

[00:19:28] Adam Werner: Yeah. And I guess last thing I'll say there. 'cause now it just sparked another thought. Just I'd imagine there are people out there. Maybe that are struggling with that, and I think subconsciously they probably know they're okay. But there's just that, that one little inkling, But what if I'm not, like, what if it's not enough? 

And just that you kind of just latch onto that one kind of negative idea and it kind of, 

[00:19:55] Ben Haas: yeah. 

[00:19:55] Adam Werner: Yeah. Just overrides everything else. So I think that there probably is a scenario where people are aware. Maybe they're having this struggle, but maybe just can't quite put it into terms, right. Just being able to verbalize the actual internal struggle. 

[00:20:09] Ben Haas: I'm not immune to that. If I have that thought at 3:30 in the morning, I guarantee I'm not falling back asleep. Right? 

[00:20:14] Adam Werner: Fair. Yeah. 

[00:20:15] Ben Haas: So that's the whole point. This is so normal. It's why I'm glad we kind of we're willing to have this podcast. Right? We're not defining rich, we're not defining poor, we're not trying to use specific terms here. 

It is the mindset that maybe you have wealth, but it still comes with a lot of anxiety. Well, let's walk through that. Like that is a big part of our job at this point. 

[00:20:35] Adam Werner: Yep. Yep. 

[00:20:36] Ben Haas: As always, thank you for your help. 

[00:20:38] Adam Werner: Alright, thank you. 

[00:20:39] Ben Haas: Catch you next time. 

[00:20:40] Adam Werner: Bye. 

[00:20:48] Ben Haas: Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only, and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you, consult with your attorney, your accountant, and financial advisor, or tax advisor prior to making any decisions or investing. Thanks for listening.  

Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.  are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice. 

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