“Beware of little expenses. A small leak will sink a great ship.”
-Benjamin Franklin
Your expenses don’t just represent your spending, they represent who you are. Are you the type of person who only eats out once or twice a week or are you the type of person who takes joy in paying for your whole extended family when you dine out? Do you buy expensive items at full retail, or do you wait for them to go on sale? These may seem like comparatively small matters, but everything you do affects your life in retirement.
I occasionally get asked whether I advocate a lifestyle change after retirement. It’s a question that depends on a lot of factors, but there is one thing I can say with certainty: the biggest lifestyle change I advocate is to be doubly aware of your expenses, and if you’re not retired yet, it starts now. Those who are a little lax in managing their finances are more likely to feel the pinch when funds become a fixed amount.
I had my first meeting with Terrie about one year before her scheduled retirement, after which she disclosed that she had 16 credit cards from various retailers. Terrie’s greatest fear was that this debt would make it impossible for her to enjoy her retirement, and that it would prevent her from passing anything on to her heirs. We had work to do. I started out by assuring her that she had options. Terrie was able to sell her investment property, which was experiencing a negative cash flow. This immediately put us on track to paying off the debt. In addition, we incorporated a structure to her plans so that she could afford long term care and life insurance. With this plan in place, she has been living life the way she always wanted.
I relate this story to illustrate how important budgeting can be, and the consequences that living outside a budget can have. Budgeting is comparatively simple, undeniably good for us, but always a challenge to actually do. A Gallup Poll put the percentage of Americans who don’t budget at all at 68%.
Below are a few signs that indicate your budgeting system needs to be revisited:
• You’ve got a 401(k) through your job with an employer match offer, but you feel you can’t contribute the maximum.
• There’s no way for you to easily total your fixed monthly expenses
• You’ve tried more than once to accurately budget your variable expenses, but weren’t able to stick to the plan.
• You don’t think of the amount you and your partner make until you have to.
• Your budgeting or savings goals are erratic or they change too often.
• You’re spending more than you’re making!
As your retirement approaches, how will your budget change? Schedule an in office or over the phone consultation to discuss how Miramontes Capital can help you with your new beginning through retirement planning.