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To assess a client’s spending habits, advisers may analyze credit card statements and tie their account to financial planning software that tracks transactions. This allows the adviser to monitor the client’s cash flow.
Advisers also use quicker, easier ways to evaluate if someone spends prudently—or not. They pose smart questions, study a client’s daily routines and observe their appearance and behavior.
Like many advisers, Mike Biggica seeks to support clients’ efforts to align their spending with their stated goals and values. To gauge their progress, he reviews their big purchases and asks, “How long did you take in deciding whether to buy that?”
“Oftentimes, these are impulsive purchases using a phone or website with their credit card information pre-loaded on the website,” said Biggica, a San Francisco-based certified financial planner. “In discussing how intentional they are about spending, we gain insight about situational settings where unwanted spending occurs,” such as peer pressure to spend heavily on luxury items to keep pace with free-spending friends or neighbors.
Advisers use different ways to determine how impulse influences a client’s spending. David Hunter, a certified financial planner in Palmyra, Pa., likes to ask, “When you make a big spending decision, how much research do you put into it?”
“If they’re not slowing down the process and doing a lot of research, that may indicate they’re being impulsive,” he said.
Sometimes, a simple question can provide a baseline to help an adviser understand a client’s spending preferences. When working with couples, for instance, Hunter likes to ask, “What does Saturday night usually look like for you two?”
“If they say they watch Netflix at home, that’s one thing,” he said. “But if they say they go out to a nice restaurant, go to their beach house or travel a lot, that’s another.”
Delving into a client’s car-buying strategy or dining choices also reveals their attitude about money. Frugal types may boast of how rarely they trade in their car (“I’m at 150,000 miles and counting!”) or their cost savings from savvy supermarket shopping.
In getting to know his clients, Noah Damsky may find out what cars they drive. The Los Angeles-based adviser notes whether they buy or lease — and if they prefer to acquire used or new vehicles. “We use pieces of information to gather what kind of recommendations the client will be more able to follow and implement,” Damsky said.
Another clue to understand clients’ spending behavior involves their meal planning. Sticking to a weekly eat-at-home routine indicates a more mindful spender.
Damsky explores whether clients have an informal schedule for dining out. For instance, some people like to limit restaurant meals to weekends and prepare in-home meals during the workweek. Others will say they go to restaurants whenever they want. “In that case, I might suggest that they adopt more discipline in their food spending if it looks like they’ll benefit from a little belt tightening,” Damsky said.
Schedules are important. Advisers may urge clients to establish a budget and withdraw a set amount of spending money every month. Advisers can then see if clients are sticking to their regular withdrawal schedule — or not.
“I’ll look at whether they’re pulling money out in an unscheduled, haphazard manner,” said Aaron Schindler, a New York City-based certified financial planner. If he spots a frequent pattern of unscheduled withdrawals, he may probe to determine what’s driving their uptick in spending.
Sometimes, advisers don’t have to ask any questions to gather details about how people spend their money. Damsky recalls being introduced to someone and noticing his Rolex wristwatch. The next two times they ran into each other, he was wearing a different Rolex. Said Damsky: “It tells you about their priorities if you see them wearing three different Rolexes the first three times you meet them.”
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