Developing Financial Discipline

Most of us near-retirees and many actual retirees were raised by people who lived through the Great Depression of the 1930s. Most of them were quite thrifty, maybe even miserly. This trait was almost universally attributed to their life experience – to their environment.

Most children of these Depression era parents are thought to be not very thrifty, maybe even spendthrifts. This is usually attributed to their opposite experience – their formative years’ environment of ready employment and rapidly advancing standards of living.

I’m sure these differences in external influences made a difference in how these two generations thought of and used money. But, I also think there is another factor. And, I base this opinion on my own personal experience

One of our two sons has an almost manic compulsion to spend. The other is still in college, but already has a pretty nice liquidity cushion in his savings account as well as a few mutual fund investments. Yet, they grew up in the same environment.

At least part of this financial characteristic has to be innate in each individual.

I recently ran across some confirmation of this. George Lowenstein of Carnegie Mellon University monitored actual brain functions as people made purchases and found that everyone experiences pleasure from buying, and also subsequent displeasure with having to pay for the purchase (buyers’ remorse?). But, some experience this displeasure/remorse far less than others. For them, it’s all gain and no pain.

The significance of this in the retirement realm? Don’t expect your spending patterns to be easily changed in retirement. Without a lot of work, however you behaved pre-retirement is likely to continue post-retirement. You’re wired that way.

Contrary to the usual perception of our generation noted above, the study also found that under-spenders are more prevalent in the U. S. today than over-spenders, but are just less visible. I guess spenders love to spread the joy of their purchases while the more penurious among us are quietly watching their wealth accumulate. I wonder who’s happier (at least until the money runs out).