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| Advisors' Forum |
Keeping Up
01/01/2008
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My husband and I both come from families of wealth and are
lucky enough not to have had to work beyond managing the incomes our parents
have created for us. In the five years we have been married, we have traveled,
done philanthropic work and started a family. But there is a threat to our
lifestyle that I am worried about: my husband’s need to always have the latest
and the best material things. The costs are getting out of hand and could
undermine our core finances. How can I help him resist the pressure of keeping
up?
Your brief description makes me
believe that your husband may suffer from "affluenza" with an addictive element.
Affluenza in its simple definition is an unbalanced and sometimes dysfunctional
relationship with money. It is important to recognize that the pressure to keep
up is internally imposed, although most people blame the external environment
for their own inability to control spending and their lack of true
self-confidence.
I suggest that you talk to your husband when you are both calm
and relaxed. Your aim will be to find out if he is aware of his behavior. Does
he understand that he always needs to have the latest and best material things?
That the costs are getting out of hand and that this behavior provides your
child with an unbalanced role model for spending? Does he understand how it is
affecting you?
If he is aware of the above but does not know how to stop or
change, you can help him by taking control of your financial spending. You
could play a game in which for one month he buys nothing new. If he manages
well, by the end of the month he is rewarded with something you both agreed upon
in advance. If he is not aware of his behavior, or denies your concerns, you may
want to consult a professional for several sessions.
Ronit Lami, psychologist, Beverly Hills, Calif.
It is important to develop
emotional awareness regarding money. The pressure to continuously keep up may
imply unhealthy social circles or life goals. For some, the addiction to
spending can be a result of underlying problems. It can lead to a life without
money and ultimately a life without meaning. It can also foster
irresponsibility, negative entitlement and other poor traits in the next
generation.
Examine how much you spend on your lifestyle annually for
housing, travel, food, entertainment, taxes, philanthropy, etc. Then examine
what percentage of your total inherited nest egg this lifestyle comprises.
Generally, as long as you are withdrawing no more than 4 percent of your entire
financial portfolio invested in a balanced strategy (50 percent stocks, 40
percent bonds, 10 percent cash), you should be able to sustain your lifestyle,
survive market volatility and keep up with inflation. You should examine your
investment strategy to ensure that it is appropriately adjusted. Consult your
financial advisor/wealth manager for help performing these analyses.
Ultimately, you should openly discuss your life goals together
and agree on the type of monetary lifestyle that will satisfy them. Once you
determine this, you should apply the rules of portfolio theory, investment
allocation and withdrawal rates. It is a continual process that should be
examined annually.
Joseph I. Chu, Merrill Lynch, Greenwich, Conn.
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