My family hails from the middle of the country, and I grew up enjoying a very traditional midwestern Thanksgiving dinner. This included dishes with whipped cream and marshmallows masquerading as "salads" and casseroles with canned cheese topped with cereal flakes. There were also heaping mounds of creamy mashed potatoes, fluffy dinner rolls, and every kind of pie you could think of. And, of course, we would have a giant turkey which wouldn't be complete without the heirloom antique gravy boat filled with that classic Thanksgiving sauce.
I'm personally not a huge gravy fan. I was fortunate to find my way to Pepperdine University, just a few miles from Westlake Village, and during my time there, I was introduced to the fresh produce grown just up the coast and decided to give up meat. But the visual of gravy being poured over a heaping plate of food until every nook and cranny was filled remains with me every Thanksgiving season – the picture of abundance.
"Everything else is gravy." It's a term I've come to use personally and professionally when building financial budgets. We begin by allocating our income to our base needs – shelter, food, and clothing. Then we turn to the helpful but less necessary things – childcare, housekeeping, insurance, education. We add on the savings and giving we've committed ourselves to as part of our values. And after that, it's all gravy. Everything else is extra – intended for enjoyment. Travel, dining out, entertainment, hobbies – the things that bring us joy. When it comes to planning, we want to know that we'll be taken care of and that we can meet our basic needs. But it's times like these, when inflation rears its ugly head, that we truly see where the gravy is and whether it may be drying up (for more of our thoughts on inflation, check out my recent article here). Fortunately, we can plan for margin so that there remains space to continue enjoying what you love even when times are tighter. Read on for five tips on preparing for and enjoying the gravy in your budget.
1. Save the Raise
This tip is essential if you're early on in your career: save your raises. My daughter recently learned about the different forms of matter and how the hallmark trait of a gas is that it expands to fill whatever container it's in. The average person's finances are like gas – they expand to fill your lifestyle. Left unconstrained, most people will spend more when given more. I think back to the budgets we built when we were first married and making much less than we do now a decade later (of course, we didn't have kids then, and I credit them for most of our spending, but that's an article for another day!). We have much more income coming in now, but we don't feel like there's a ton more gravy in part because we're spending more as our lifestyle has evolved, but also because we've tried to limit our lifestyle from expanding too much by saving more. For many just starting out on their financial journey, committing to saving your raises can hugely impact your future finances, and I cannot recommend it enough.
2. Be Conservative
When building plans, we try to be consistently conservative in our assumptions to maintain a sense of margin for our clients. This means not being overly optimistic about future returns and ensuring we're appropriately accounting for things like taxes and inflation. In the past, I've worked for firms that would take a more aggressive approach to win over clients. Unfortunately, when the economy contracts, this can lead to clients feeling a squeeze. I would much rather have an honest conversation about the reality of a client's finances and the feasibility of their plan, even if it's a hard conversation. Shaving a percent or two from inflation estimates here and there so I could give them a great-looking plan may make them feel good, but it wouldn’t serve them in the long run. We plan for moments like these so our clients can feel confident in enjoying their retirement and taking the cost-or-living adjustments they need.
3. Treat Yourself! (in moderation)
One of the defining characteristics of gravy is that it's really decadent – definitely not something that you want to be eating a ton of at every meal. Likewise, one of the best ways to cultivate a contented plan is to treat yourself in moderation. This concept is closely connected to tip #1. I enjoy going to the spa, especially after a busy season where stress may have taken up a lot of space in my life. But if I started taking a spa day once a week, my budget would need to expand to allow for this added lifestyle choice. Not only that, but I strongly suspect that I would derive less enjoyment and utility from those spa visits because they would cease to be special treats and would, in many ways, become an obligation. In the past, we've encouraged our clients to fly first class (if not, your heirs will!). We've received a lot of feedback from clients excited to do so, and the reason it's so appealing is that it's special, but as my five-year-old likes to tell me: if you have too many special things, they all become boring after a while. Instead, treat yourself when the occasion merits it and enjoy the special moment.
4. Don't Worry About Your Neighbors
Laurie Santos, who studies positive psychology at Yale and offers the popular Coursera course "The Science of Well-Being," shares that a significant predictor of happiness is how well we feel like we're doing relative to others. As human beings, we often want to benchmark ourselves. It's why articles like "What the Average 50-Year-Old Has Saved for Retirement" are so popular. We want to know how we're doing and often decide based on reference points. Unfortunately, comparisons are often the thief of joy… and contentment. Instead, Ms. Santos recommends focusing your time and energy on the things that you enjoy and want to value with your hard-earned money. Just because your neighbor chose to buy a boat with their savings doesn't mean that you have to also – especially if you hate water! The taste of gravy is unique to both the recipe and the chef. Don't miss out on making the most of your legacy because you're concerned about what kind of Thanksgiving dinner someone might have next door.
5. Practice Gratitude
As I write this article, many are preparing for the holiday season. One of the things I think is fortuitous about this time of year is that we kick it off with Thanksgiving – a time to be intentionally grateful. Recently, I have felt a pervasive sense of scarcity resulting from inflation, the financial markets, and a general sense of "not-enoughness." A scarcity mindset can lead to all manner of unwanted feelings and behaviors. It tends to cause panic and anxiety, leading us to lash out in anger and frustration. Scarcity tells us to clench our fists, hold tightly to what we have, and demand more. This behavior is human nature, and scarcity, while it has a harmful attitude, is nevertheless a real experience that we may face from time to time. In response, I believe the greatest tool we have is to actively practice gratitude, bear witness to what we have, and strive to make the most of it. So, this Thanksgiving, I hope you do just that. As you gather with friends and loved ones and drench your plate in gravy (if that's your thing), may you take a moment to remember the things in your life that feel like "extra," even if they are few. For all of us at Sherwood, one of the many things we are grateful for this season is the gift of working with so many great clients and getting to journey with them as they build their unique legacies.