maintain the illusion of affluence . If they use unexpected bonuses to fund spontaneous vacations or put pay increases toward higher lease payments on a newer car , a higher net worth will remain out of reach for them . Their net worth always suffers when depreciating assets are prioritized over tangible wealth .

An extra $ 600 spent on a car payment might not seem like much to someone bringing home $ 16,000 a month or more . But $ 600 per month deposited in an investment account earning a 7 % return translates into more than $ 700,000 over 30 years . If 20 % of a $ 16,000 monthly income is put into the same account , the end balance after 30 years is $ 3.7 million .

Some observers think social media has contributed to misplaced financial priorities . Your clients might like sharing their latest purchases on Instagram . It ’ s the modern equivalent of “ keeping up with the Joneses .” Allianz Life reported in 2018

Savings and investing need to be as important ( preferably far more important ) as a newer car or another vacation .

that 57 % of respondents to a firm survey said they ’ d made a purchase they hadn ’ t planned to because of a report on social media . A Stackla survey found that 59 % of consumers say that user-generated content is more authentic . The takeaway is that social media scrolling might allow your clients to increase their savings .

Having Difficult Conversations About Affluence

The most difficult conversation you can have with your clients as a financial advisor is the one about the affluence illusion

and how they overcome it . Since retirement and savings are subjects that concern the future , something your clients aren ’ t thinking about , they ’ re easy subjects to blow off . “ We ’ ll worry about that later ,” is a common response from those who have made retirement planning a low priority and perhaps see a new car as a more immediate issue .

But advisors can make retirement planning more immediate to clients by showing them what happens if they continue to downplay savings and by making them wrestle with the outcomes . Your clients need someone who will challenge their ways of thinking about finances , especially when their priorities are blocking their potential for building net worth .

AARON CIRKSENA is the founder and CEO of MDRN Capital , which offers a comprehensive range of services , including income planning , investment management , tax planning , healthcare planning and estate planning .

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JUNE 2024 | FINANCIAL ADVISOR MAGAZINE | 43