4 Powerful Mindset Shifts Seniors Wish You Knew

One of the most valuable things most seniors have learned is the art of managing money. The second thing they have gained is an entirely new perspective on life and how the past and the future blend together to create an amazing life.

In this post, seniors offer you valuable advice. Although the financial tips are no big surprise, the perspectives seniors bring to the table could alter the way you think about your own life, your money, and aging.                                                                             

Tip #1 You Don't Have as Much Time as You Think

People in their 30s and early 40s think they have an abundance of time left on earth, so they feel like they can procrastinate on their financial goals. Most people don’t bother to seriously start saving until they are in their forties or maybe even a little later.

A common problem is that most people view saving and investing as deprivation, the same way many people view budgeting. A lot of people in their 30s feel this process is a big sacrifice for a future their brain cannot even fully envision. In psychology, this is called temporal discounting.

Senior Perspective Shift: 

Shift #1: Until you are in your late 60s or 70s, you don’t yet fully understand that all your combined choices over the years created the life you will have. For better or worse, you build the life you will be living decision by decision.

Shift #2: Only in the investing world can the passage of time literally be transformed into cash in your pocket. We all know that time will pass anyway, so why not get paid for its passage. Consider this: just $5,000 invested in the stock market can create approximately $33K in 20 years if just left alone (using the generally accepted historical rate of stock market return since 1928 of 10% annually). Investing is the only place you can possibly get paid for the progression of time. Don’t squander your precious gift of time by not investing.

Help From Science: 

Science provides us with two techniques that stand out as way to overcome temporal discounting.

• Many people view saving and investing as a hardship. This is similar to how people feel when they budget their income. You can overcome these feelings by changing your mindset to viewing budgeting, saving and investing as methods of self-care.

• Another way to overcome this issue is to regularly meet with others who are saving and investing, which can help motivate you and keep you motivated to excel at this task. There is nothing better for your motivation than friends regularly sharing investing knowledge, talking about their current investments, and giving an update on their individual progress toward their financial goals.

Tip #2: Unleash The Power of Your Income

The #2 tip most commonly given by seniors is to get out of debt. Yes, you know this intellectually, but you likely don’t understand how much your debt is harming your family.

Senior Perspective Shift:

My wife and I unlocked the amazing power of our jobs’ income when we got away from paying consumer debt and the thousands of dollars in interest we had to pay on that debt. Once our debt was gone, we had a lot of money for investing and almost everything else we needed. Living within our day-to-day budget was a snap after our “get out of debt” journey. The change created time and money for the many trips we took with our family. Our family still remembers these trips fondly today. The shared experiences we had with our family are priceless.

Many of our peers, however, didn’t make escaping their debt a priority. If you never get out of debt, you and your entire family will live a downsized life for decades. You and the family will only get to do the minimum for decades, while others experience the full range of adventures life has to offer. Debt is a killer of family bonding.

Help From Science:  

Science gives us two tips for getting out of debt. For those who want to get out of debt, developing a plan stands out as the best way to get started. Studies also show that debt counseling is very effective for those with chronic debt—as well as support groups like Debtors Anonymous. Credit unions, banks and many other organizations offer entirely free or almost free debt counseling. Debt settlement companies do not have a great reputation so we strongly urge you to try free sources first.

Tip #3: Unlock The Serenity of Multiple Income Streams

Create multiple income streams for your use when you are older, unable, or just don’t want to work. It’s not a big surprise that seniors would give this advice.

Senior Perspective Shift:

Seniors understand the awesome power that multiple income streams bring to their life. A senior with only one income stream is financially vulnerable, while seniors with multiple income streams have more diversification and resilience and less reliance on Social Security. Multiple income streams provide seniors both peace of mind and lower stress.

Help From Science:

94% of retirees with one or two major sources of income outside of Social Security report living financially comfortably, compared to 60% of seniors who have Social Security as their only income source.

You don’t have to be a business or financial genius to create multiple income streams. It is easier, however, to begin creating additional income streams when you are younger as opposed to waiting until you are already a senior and worrying about this issue.

Here are income streams we are talking about outside the realm of Social Security:

• Military retirement

• Military disability

• Government pension

• Company pension

• A part-time job in retirement

• Owning a profitable business during retirement

• Income generated by your investments

• Selling your small business when you are older and receiving ongoing, monthly cash payments from that sale

Tip #4: Knowledge Pays Better 

The Financial Education Council reports that seniors have the best scores on financial literacy tests in the area of money management. The higher scores are the result of all the experience they gained managing their finances over multiple decades. Even seniors, however, don’t do as well as they should when it comes to investing. Like everyone else, they understand the concept of investing, but get lost when more complex issues like stock earnings, asset allocation or common investing practices are discussed.

Senior Perspective Shift:

The irony of this lack of investing knowledge is that over 62% of Americans own investments either directly or through their retirement account’s mutual funds. Yet, these same people do not really understand investing. Investing test scores show the average score is a failing 50%. Nearly every successful senior will tell you that learning to invest is very important.

Help From Science:

A recent study pointed out that those people who possessed greater financial knowledge not only did better in their own investing endeavors but also received better financial advice when they talked with a financial advisor. Financial advisors understand and appreciate when their customers are more knowledgeable and likely delve deeper into investing discussions than with their less knowledgeable customers who likely only receive cursory advice.

Increasing your investing knowledge is the easiest fix of all the issues we have discussed here. Just read my financial books (or other successful investing books, if you must). You and your significant other should make it a goal to read five or six financial books this year.

Wrap-Up

Start saving now, get out of debt, create multiple income streams, and learn about investing is standard financial advice that you have likely heard many times. Now you know, after listening to our seniors, how time and experience create the reality you get. Most people never think of investing as getting paid for the passage of time, or that debt will harm your family’s shared experiences, or even that financial advisors may provide their knowledgeable customers better advice. We hope these tips help you create the life of your dreams.

-Larry and Lisa Faulkner