It was the best of times; it was the worst of times. But this story isn’t about two cities. It is about two investors. Two brothers actually, we will call them Billy and Randy for this story.

Ten years ago, their mother passed away. After her funeral, the two brothers came into my office. I handed each of them a check for $400,000 from their mother’s estate. I asked them, “Now what do you want to do with your inheritance?”

Billy immediately chimed in and said that he wants me to invest it into a diversified portfolio of mutual funds and ETFs. He further stated that he is only 55 years old and plans to keep on working.
After Billy finished, I asked Randy what his plans were with his new fortune. Randy thought for a moment and slowly mumbled that he wanted to follow his older brother and invest the money. He said he also plans on working until retirement age.

So I asked more questions to help create a portfolio suitable for each of the brothers. The accounts were opened and I began to invest the money in each of their accounts.

The assets began to gradually grow in value. Everything was going well until…the telephone rang. It was Randy. He sheepishly said that he needs some money from his investment account to pay for repairs to his car. I asked him if he had an emergency account to pay for the repairs. He replied that he used to have an emergency savings account but he had drained it last month when he had to upgrade the television so he could watch sports.

Upgrading a TV is hardly an emergency. I asked how much money he would need to repair his car. He said $5000. After that phone call, I thought this was just a special occasion and Randy would not call again.

A month later, Randy called again asking for more money because he had to buy a new motorcycle.

A few weeks later, he called again saying he needed a bigger trailer for his motorcycle.

The phone calls continued, along with the excuses such as: Their daughter needed to move. The house needed the bathroom remodeled. They needed a bigger truck to tow their new camper. Randy needed a hot tub for his sore back.

After several years, Randy drained his entire inheritance, while after ten years, Billy grew his account to over one million dollars. One brother spent his entire inheritance and the other invested it and now is enjoying his nest egg.

Now that Billy is retired, he decided to withdraw the standard amount of 4% ($40,000) from his million-dollar portfolio which will provide income throughout his life. Billy is now enjoying his inheritance by being able to travel around the world with his wife and restore classic cars.

As advisors we have seen situations like this play out and make it a point to have crucial conversations with our clients when we see them heading down a path of overspending. If you would like to hear what it would look like to work with an advisor who will keep you on track, get in touch with us.