At my age, money is ….
This is the 3rd in the weekly Series called Retirement Happiness. In this Series we discuss the issues and concerns about money, and how its various components are so inter-twined that sometimes we cannot see a solution to our constant fear of running out of money as we get older.
Part 8 – Expense Control, Part One
Ï’m retired, I can’t afford that.
How many times have you heard a retiree say that ? Come to think of it, how many times have you said it yourself?
There’s a difference between genuinely not having the money to buy something and speaking as if you didn’t have the money.
There is no doubt that some retirees, shall we say, play on the fact that they are retired and, even though they DO have the money, they seem to think it is their right to say they don’t. Each to his or her own I guess. The problem is when you actually don’t have the money to buy the basics of life, retired or otherwise – food, shelter, utilities, etc.
Controlling expenses is probably the most important financial issue to be handled in retirement. In other words, if your income is based on pensions and investments then your cash inflow is probably close to be fixed. So in the absence of any other income (e.g. part-time work) then your income cannot be changed much, if any.
Hence the expense side of the balance sheet has to be targeted.
Many people scoff at those of us who keep spreadsheets and make projections, budgets etc whatever you call it. They laugh. Let them. If you are one of those smart people who does keep a spreadsheet – and follow it daily/weekly – then you are well ahead of the game.
It reminds me of the old joke, “ I must have money in the bank, I’ve got lots of checks left.”. It won’t be a laughing matter when they outgrow their nest egg, or spend foolishly in their earlier retirement years and have little left in their latter years and then have to worry about those basics.
Identify the basics that you need and estimate their monthly cost, keeping in mind that some expenses fluctuate over the 12 months of the year, so an average should be worked out. Let’s presume that BEFORE you retired you did actually calculate that you could retire !!!
So, if your income covers those basics (watch the credit cards) then the surplus is the extra you have each month to treat yourself, or save up for that holiday, or buy that new car at some point in time. Don’t be silly and spend the extra just because you get to the end of the month and realise you have that excess and “tomorrow” starts a brand new month and hence a new monthly set of numbers. Try keep some in reserve.
More next week …
You should be able to instruct your pension provider, and in turn, the investment manager of your pension fund, what tolerance level you have for your investment decisions, ranging from “conservative” to “aggressive”. It is not an easy decision to make, especially to get it consistently right, so every appropriate financial advice must be taken. This is a broad overview and by no means can be classified as solid advice in your case. Be careful.