How can I maximize the money I have? Very carefully, of course!
There are ways to make your money last much longer, and once you start to consider retiring it’s a foregone conclusion that you have to start doing exactly that. This is one of the hardest things to get used to for some folks, especially after making decent money at their careers and finally “making it” financially. But believe me, if you want to ever retire with enough money to last you for the rest of your life, you will have to cut back at some point. We know in our heads that is the truth, but our heart still wants to go out with our spouse for dinner every weekend and have a nice meal. Or go to the movies or concert, or wherever it is you like to go, and have made a habit of it for many years most likely. I’m not saying you can’t still do things like that once in a while, but if you add up all the money from things such as this you realize pretty quickly that it’s not smart spending!
You may not be an accountant, or even know that much about accounting (I flunked accounting in college myself) but you have to know that there are two sides to each financial balance sheet – the debits and the credits. In your personal budget this means you have money coming in, and money going out, so you really have to be smart about both sides of this equation in order to make your money last a long time. Even if you have a couple of million dollars in the bank, you need to make that money last as long as possible once you’re retired because it’s not going to grow very fast, even if you have it invested.
Once you have stopped working full time, the only money coming in is going to be from your investments and possibly social security or if you’re lucky some pension you earned working for 30 years somewhere. This is what’s called a fixed budget – and you really have to watch your spending at this point in your life. I’m sure you have heard many stories about the lucky lottery winners who thought that money would last forever, only to find out it’s gone in a few years. How did that happen? Well, life happens. That house they bought needed maintenance, plus taxes, insurance, etc. Those vacations they took cost way more than they thought. Plus, all the jewelry they splurged on really added up as well, and pretty soon the money has dwindled to almost nothing.
And what if you happen to be unlucky enough to develop a medical condition such as diabetes (or worse)? I believe they call that “lifestyle creep”, when you spend more than you think due to perceived riches, without adding your expenses up to figure out the total cost. The total cost which in future terms is something you don’t even know for sure yet! That is perhaps the scariest part of retirement – not knowing the future, which means not knowing for sure how much money you need to last you until you die.
Don’t get the wrong idea, you don’t have to act “poor” once you’re retired, at least as long as you have done your homework right. What I mean is that you must change your mindset to make the habit of watching pretty much every dollar that leaves your bank account – from finding the best deals on home and car insurance to avoiding overspending on those trips to the mall. Better yet, stay away from the mall! If that’s your idea of a fun weekend, going to the local mall and splurging on new clothes or whatever, then by all means wake up and realize how much that will hurt your long-term happiness in retirement. There is definitely a thing called “retail therapy” when lots of people enjoy spending their money on things they don’t need. I would say maybe you would be wiser to see a real therapist instead. Recognize your weaknesses when it comes to spending money, and you should be fine. Otherwise, trouble could be in your financial future!
Planning for your retirement can be tricky, and there are questions you have like everyone else. If you want to learn and explore more ideas for yourself, check out my book here for more information:
http://www.amazon.com/dp/B0D3S2V9VM
Happy retirement planning!