Since the onset of the financial meltdown, advisors have found themselves taking part in a host of intimate discussions with their clients as shell-shocked investors began to reexamine their possessions and spending, and many began tightening their belts.
Surprised Boomers found themselves deeply underwater on one or several homes, saw that their extended family responsibilities might well come at a price they hadnt quite anticipated and realized that their monthly spending was alarmingly outpacing their income.
But, fearing they were delving into the realm of realtor or family counselor instead of financial steward, some advisors neglected these topics with their clients. The more astute and confident advisors recognized that these topics were not ancillary, and were directly related to investing and retirement. After all, money is money. A dollar spent on a monthly wine club membership is one not invested in an IRA.
Despite the new focus, there seems to be one area of spending that has gone largely overlooked. A key question that many advisors need to put to their clients is this: Whats your GTIR? Thats pronounced Jeeter as in Derek.
Whats a GTIR? Its your Guy-To-Income-Ratio. Guy is a euphemism for person any person, male or female, you pay to perform a task you prefer not to do yourself on a regular basis. Were not talking about the occasional contractor or medical specialist for something here or there. Were talking about somebody who you pay on a regular and ongoing basis to perform such a task in many cases a task which previous generations of Americans would have never dreamed of paying someone else to do for them. One of the tell-tale signs of a true guy is that you often no longer make special calls to him or her to show up the schedule is set and followed and you may even be a bit surprised when he shows up at your door. Perhaps youve been part of a conversation like this one:
Melissa: Elyse, you always make me feel like a slob because your car always looks like it came off the showroom floor.
Elyse: Ha! Yeah, I got a guy for that. He comes over every Saturday morning does the inside and out right in my garage for $75. Cant beat it.
Do you mow your own lawn, or do you have a guy for that? Do you clean your own house, or do you have a guy for that? Do you organize and prepare for your own parties, or do you have guys for that? Do you have a guy to wash your windows? Do you have a guy to walk, wash, or house-sit your dogs? Cook your meals? Do your nails? Spray your trees for insects? Put chemicals in your Jacuzzi? Tend to the pumps and the Koi in your pond/fountain? Tutor your kids? Do your laundry? Organize your office or pantry shelves? Drive you to the airport? Etc., etc. You get the idea.
While it is no surprise that the wealthy have always had their guys, as Americas income per capita jumped with the raging bull markets of the 80s, the middle class joined in as well. Precise empirical evidence for the metric is hard to identify of course, but based on my interviews with boomers regarding retirement, it is clear that Americans GTIRs have soared over the last several decades. Even though the country is still working through the largest financial meltdown since The Great Depression, and people have increased their overall frugality, many Americans have yet to make any adjustment to their GTIR.
So what is a safe GTIR? That of course depends not only on income, but on the cost and interval of the given service. That said, as a rule of thumb, if someone is hiring any more than one guy per $75,000 of income, theyre probably not being as fiscally prudent as they should. So, a person making say $300,000 per year has a normal or target GTIR of 4 ($300,000/$75,000) and is probably safe in having his house cleaned, lawn mowed, car detailed, and kid tutored.
But the real danger is for those earning less than $100,000 per year who have GTIRs more in the 6 to 8 range. Advisors tell me regularly about clients earning $60,000 a year who have their meals prepared, houses cleaned, regular massages in their homes and wouldnt think of washing their own cars. Its part of the same mentality that allows people drop $4 or $5 on a mere coffee drink each morning without thinking twice. They no longer see these things as luxuries. To them, its just as basic as a utility bill.
The old saw is that the first step toward resolution is recognition. If you have clients who are struggling with the regular investment goals youve designed for them, and just cant seem to understand where the problem might lie, it could be time to ask: Whats your GTIR?
Dr. Salsbury has written about about retirement planning and investor psychology for over 20 years. His 2006 award-winning work But What If I Live? predicted the subsequent financial meltdown; and in 2013, advisors picked his sequel Retirementology as one of the top 20 books most crucial to their practices.
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