How to age (financially) gracefully

The Cheshire Cat, a character in Lewis Carroll’s “Alice’s Adventures in Wonderland” and “Through the Looking-Glass,” slowly disappears until just its smile remains once its body is gone.

If we were to view our own lives this way, how can we set ourselves up to age gracefully and leave a smile on our face as we eventually fade away?

There are a number of small steps that lead to large outcomes I’ve learned after working with clients for many years. Here are a few to consider:

Constantly, we make financial decisions with a sense of immediacy that is often unnecessary. The housing market is going crazy, so we have to jump on anything we can. The stock market is getting away from us, so we have to take on more risk than comfortable. There is a fire sale on something we didn’t know we wanted, so we have to grab it.

Slow down.

Work backward to determine your next steps. Where do you want to end up and why? Most of our clients who look back on their lives with fond memories tend to focus on what is pretty obvious: the relationships most important to them, the things they did that created lasting memories and the things they would have done differently if they felt secure.

There were only some things they could control, but paying attention to those things left them smiling more often than not.

Some of us legitimately barely have enough to make ends meet, but many of us can feel stretched because endless wants obscure our definition of needs. The more we have to convince ourselves we need something, the less we need it.

Investing is always giving up something with an expectation you will receive a return on it. This is not limited to money. Long nights invested at the office could result in a promotion. Investing in family rituals might create a closer bond.

But there are no guaranteed investments, and they can be disappointing at times. Your process for making these choices is what you can control. A good process might not lead to good results, but you have put the probabilities in your favor.

We discount the future and therefore don’t understand our time horizons. When I started in the business, we would see clients slow down in their late 70s. Now it seems they begin to slow down in their early 80s.

Regardless, time catches up to them. Don’t delay the things that are important to you for an uncertain future. But make sure they are really important.

The more control you have of your monthly spending, the higher percentage of your assets you can safely spend. Your ability to adjust spending down during difficult times allows you to spend more sooner. But carrying out spending to 95 means you need to protect yourself from short-term volatility (through owning bonds and cash) and long-term inflation (through owning stocks).

One of the worst rules of thumb is to own bonds equivalent to your age. This makes you too conservative too soon.

Look at decisions you have made curiously rather than judgmentally. Curiosity allows you to explore why you did or didn’t do something and gives you a better chance of changing. Judgment can lead to shame and often inaction.

For your smile to remain as time moves on, make good decisions sooner.