Blog: Spirit of Money, Financial Fluidity
by munificent

Downshift Specialist hahahah

I will be working forever, probably in the nonprofit money raising sector- but ,man, it does my heart good. And I'm all about the following my bliss in what I do for money!

Date:   10/28/2005 9:42:06 PM   ( 16 y ) ... viewed 1580 times

This is Me! Oh yes, this gets my underwear in a bunch!

Extreme Makeover
In the very near future, you may have to adjust your business model.

by Steve Moeller

Recently I was talking with a financial advisor about helping his clients create a positive vision of their future. I explained the process by which the emotionally charged vision becomes the focus for developing goals and action plans.

The advisor allowed that the positive vision approach works great when the client has a lot of money, but he asked what to do with a couple that wanted to retire in four years but didn’t have enough money to do so. This couple earns about $250,000 annually and wants to maintain that income in retirement, he said, “but they spend money like crazy; he just bought a $300,000 yacht, travels too much, and is burned out.” While the husband wants to quit his job, the advisor estimated the couple would need almost $5 million to generate enough income in retirement to support their current lifestyle. “There is no way they can save $4 million over the next four years,” the advisor complained. “What can I tell them?”

I suggested he ask if there was a way they could cut back and start enjoying life more—right now. “Have they considered downshifting,” I asked, “instead of retiring?”

A New Market Opportunity
What am I talking about? Helping investors downshift to a simpler and more fulfilling lifestyle. Many potential clients won’t be able to retire as financial planners have traditionally defined it—all play and no work. But with your professional guidance, investors can reposition all of their resources to optimize their quality of life while they still work and earn income to cover living costs.

This downshifting market runs parallel to the retirement market; you’ll still get IRA rollovers, but you’ll need to do more out-of-the-box thinking, extensive client discovery, and repositioning of major assets.

Retirement Is Only One Option
A large and growing group of baby boomers plan to work long after they turn 65. My father-in-law is 78 years old and continues to practice medicine. I recently read about a guy who was 92 years old who had moved to L.A. to pursue an acting career.

Most of us will want and need to continue working. Frankly, many people find traditional retirement—i.e., full-time leisure—to be boring. The future holds the promise of a more relaxed combination of pleasurable work, leisure activities, and learning and personal growth.

Because of outsourcing, downsizing, and other structural changes, many people get laid off or receive severance packages when they are in their 50s. Psychologists discovered this is one of the most depressing things that can happen to someone, since these ex-workers rarely find another job of equal income or benefits. This can be the beginning of a very difficult time, or you can help make it a time of renewal and transformation to an even more satisfying life.

As the baby boomers mature, accumulate some assets and life experience, many of them are starting to place more emphasis on the quality of their lives. Many people realize that they are making unsatisfying tradeoffs; spending all their time chasing success or money but missing out on the truly rewarding things in their lives.

As one employee put it “I’m not ready to quit; I just want to work somewhere it’s not so stressful.” The 50s is a difficult time for men. A disproportionate number of them die in this decade.
In one Dalbar study, investors said that the most highly valued service their financial advisors provided was to “alter lifestyle.” Clearly, there are a lot of high-income earners who are working more and enjoying life less. Many of them would love to downshift from the stress and the responsibilities a high-pressure and unfulfilling job or career.

A Sample Extreme Makeover
Let’s look at a downshifting situation that requires an extreme makeover. Our couple—Carol and Dave—are typical of the type of client you will see more and more in the future. Carol is 49, a self-employed commercial illustrator with an office in her home. She works three to four days a week, and earns about $75,000 a year.

Dave, 56, is a corporate executive who works 50 hours a week and earns $175,000 a year plus good benefits. He travels on business about one night a week. They are both healthy and raised a couple of kids who have graduated from college and are well employed.

Through the discovery process, we learn their dream is to retire in four years and move to a ranch-style home on a knoll in the country with a pool and a garden. They want a couple of acres near a small town with a university or college. They figure it will cost them about $1 million, less than the value of their current home.

Dave sees himself working a couple days a week but is not sure what he would be doing. Carol would continue doing her illustrations at home, but take more trips and extended breaks for workshops and classes. Both of them want to travel, write, ski, do photography, garden, and entertain friends. They want to be able to visit their children and future grandchildren.

But Dave and Carol only have about $750,000 of investable net worth. To generate $250,000 each year from investment income, they would need $5 million (at a 5% annual withdrawal). Clearly, they need a plan B.

So if their dream retirement is really a fantasy, what options do they have? With the help of a caring financial coach, they can look at the big picture, starting with what is important to them. Is it possible for Dave and Carol to look forward to a future lifestyle where they live on substantially less income? Sure.

The Diminishing Benefits of Income
According to research on income and happiness, money is overrated. In America, once people reach a middle-class income of about $50,000, they can pay for life’s basics—food, clothing, housing, and medical care. Income over $50,000 a year has very little impact on happiness.

So if Carol and Dave are burnt out trying to purchase the good life, they might be good candidates for voluntary simplicity. The goal would be to reduce their stress (negative emotions), increase their pleasure and enjoyment (positive emotions), and improve their overall satisfaction with life. In other words, they can experience more happiness with less money.

Let’s start with a budget that is two times greater than the $50,000 hurdle for affording the basics. That means we shoot for a target annual expense of $100,000 instead of $250,000. But let’s be generous so they won’t feel so pinched and start with an annual living budget of $125,000. That’s half of what they are living on now but more than they really need. Now let’s look at how they can make changes to sustain themselves in a better quality of life.

The first step is to reposition their assets and reduce or eliminate their debt. See the sidebar for a very simple example of how this might look (I didn’t consider taxes or Social Security or many other details. I just wanted you to get the big picture).

Remember the goal is to earn $125,000 in the new country location without having a high-pressure job. Carol could continue working from home and could actually cut back to only $50,000 a year of income because she wants more leisure time. She enjoys her job and the people it brings her into contact with.

Dave, on the other hand, would require some career counseling to determine his strengths and to help him market himself. Perhaps he needs help purchasing or starting his own business. His goal is to find work that is rewarding and uses his strengths but still allows him to pursue his interests.
Because of his experience and contacts, he should be able to land consulting contracts at between $200 and $300 an hour. If his goal was to make just a little more than Carol, he would need income of, say, $60,000. He only needs to work an average of 25 hours a month at $250 an hour to net that amount. He will have plenty of options, but he will need help defining what will be most rewarding.
The final piece of the puzzle is that their investment assets are now $450,000, so if they pull out 4% a year, that’s another $18,000 of income. Combined with the proceeds from their “jobs,” they’re now generating $128,000 of annual income. They can probably live comfortably on only $100,000 most years.

Meanwhile the $550,000 in their retirement plans and their $1 million in their home continues to grow in value (remember, these are all gross numbers without taxes or fees. Your mileage may vary.).

Start the Celebration Now
The bottom line is Carol and Dave don’t have to continue putting up with stress to chase something that’s just a fantasy. They could downshift their lives within the next 12 months and move to their dream home. They could quite easily sustain themselves for the next 15 or 20 years in this semi-retired mode. When health problems eventually stop them from working, their qualified plan, their investments. and their home should all be worth substantially more than they are now. At that point they can live off their retirement plan assets and perhaps get a reverse mortgage on their home.
In the next decade our business will rapidly shift from helping clients accumulate assets to helping clients conserve assets and find new ways to generate earned income. It is important that as an industry that we help clients recognize that they don’t need a huge income to have a happy, fulfilled, and secure life. Remember, they don’t need to fully retire, especially if they enjoy what they are doing.

I see a new niche in our industry, what I call the downshift specialist. In the process of helping your clients reposition and enhance their life experience, you will become a dream manifestor and a financial coach, not just an investment advisor.

Steve Moeller is president of American Business Visions and author of Effort-Less Marketing for Financial Advisors. Call American Business Visions at 800-678-1701, or visit

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