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Retirement Spending is Just as Important as Retirement Savings – Finger Financial Five #109

“Love is happy when it is able to give something. The ego is happy when it is able to take something.” – Osho

A friend of mine said you cannot out-train a bad diet. You can eat a bowl of ice cream faster than you can run off those calories.

Good point. The same goes for retirement. You can outspend almost any nest egg.

I have seen people who live off of $3,000/mo and felt rich. I have also seen people who make $50,000/mo and live paycheck to paycheck. 

You have more immediate control over what you spend, than what you earn

Too often, financial articles talk about how to make more money. They don’t talk enough about needing less money.

Needing less money to live your life has the same effect as increasing account values.  To illustrate this, let’s use the example of a retiree who reduces his monthly spending by $1,000 – in other words, he reduces his annual spending by $12,000. Typically, retirees are safe to withdraw 4% of their savings to cover their living expenses.  Because $12,000 is 4% of $300,000, if the retiree reduces his living expenses by $12,000 annually, it is the equivalent of the retiree having $300,000 more in savings.  

The trick is to view your wants as variable expenses.  For example, instead of traveling to Ibiza, travel to Hilton.  If the financial side of your life tightens, you can change your trip to Hilton Head from Ibiza. 

Cars, boats and condos are costly and not always easy to liquidate. 

Many lottery winners are worse off financially 5 years after they win than they were before hitting the jackpot.  This calls to mind the plot of the Richard Pryor movie “Brewster’s Millions.”  In the movie, the character would “win” only if he could spend $30 million within 30 days and have nothing to show for it. 

How to want less? Be happy with what you have. How to do that? This is more of a spiritual question. I recommend old books. The older the book, the better the lesson. Think of 2,000-year-old books…

Let me know if you have any questions. 

On the lighter side, Elliott got early acceptance to the Darla Moore School of Business at the University of South Carolina. He is going to study finance. We are so proud. My Alma Mater (The College of Charleston) won the Charleston Classic Basketball Tournament. My nephew’s high school team (Hammond) won their state championship. My high school (Pee Dee Academy) won the state championship in football. USC beat #5 Tennessee this weekend, too. Crazy good weekend. 

Have a wonderful Thanksgiving,

Jeremy

Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information.  My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions.

Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.

This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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