The biggest driver of retirement success is not necessarily how much you’ve saved. Having a big bank account is a great start; but can be quickly eroded if you lose control of your living expenses. Instead, focusing on how much you spend in retirement can have a far bigger impact on your plans!
Now, I don’t advocate living like a miser and never enjoying your hard-earned dollars! Quite the contrary. Instead, I recommend clients take some simple, strategic actions to reduce unnecessary fixed expenses in retirement. These cost cutting measures will leave more room for the “fun” side of retirement and reduce the chance of dollars slipping through the cracks.
- Pay off your life insurance early. You may have been sending premium cheques to insurance companies ever since you bought your first home or had your first child. That’s perfectly normal. What shouldn’t be normal is continuing to pay for life insurance when you’re living on a fixed income. If your policy allows, consider “paying it up” while in your working years so you can take a permanent vacation from premiums in retirement!
- Eliminate high interest debt. I’ve talked before about good vs. bad debts, so this is nothing new! High interest charges in retirement can really eat into your monthly budget. If you have credit cards, unsecured lines of credit or any other form of consumer debt, try and have it cleared before you leave the workforce.
- Watch your utilities. Forty years ago, your monthly bills likely consisted of power, water and a home phone line. Today? Tack on cable, internet, cell phones, streaming platforms, subscriptions services, you name it! The sheer volume of monthly bills can add up quickly. Keep on top of your service providers for their best deals and don’t fear switching carriers to save cash. If you haven’t opened a particular streaming platform in months, you may want to consider cancelling entirely.
- Don’t overdo it on the presents! The day you retire might just be the day your bank account balances are at their highest. It can be easy to feel especially charitable when your investment statements look rosy and a desire to share the wealth is perfectly normal. Set a budget for gifts (birthdays, holidays, special occasions, etc…) and stick to it. Trust me when I say that your family will much rather you feel comfortable in your financial security for the next few decades than have an extra new toy.
Cutting out lattes and skipping on restaurants likely aren’t going to be the make-or-break factors in your retirement success. Life, especially retired life, is meant to be enjoyed! By taking control of your fixed expenses, you’ll feel like you have a lot more financial flexibility in how you want to enjoy it!
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