Should you cut your retirement spending now? Maybe. Maybe not.
Whether you’re thinking about this out of fear, or proactivity, it’s always wise to revisit your financial situation. This is true if you’re not working and living on a fixed income (like most retirees).
I want to help you answer that question and make any necessary changes so you can keep sleeping like a baby.
I’ve been helping people find financial peace of mind for 20+ as a financial advisor. I’m honored to be named to Investopedia’s list of the top 100 financial advisors many years running.
Here’s what we’ll cover:
- Check your priorities
- Optimize your cash flow
- Revisit your budget
- Consider additional guaranteed lifetime income
Let’s get started.
Check your priorities
Before you cut your spending and change your lifestyle, it makes sense to revisit your priorities.
The easiest way to know what your priorities are is to look at your spending. We can talk about what’s most important to us, but following our dollars will give us the complete story. So how do we check our priorities?
Step one is clarifying your goals and core values. Two things you probably thought a lot about during your working years, and not as much since you’ve been retired. The idea is to align your financial behaviors with your goals and values as closely as you can. Once you’ve done that, you’ll know what tactical changes need to be made (if any).
I’m sure you understand how to think about and set goals, but how long has it been since you’ve done it? I use six key areas when thinking about and setting goals:
- Work and financial
- Personal development
- Peace of mind
What are your biggest priorities and desires for your loved ones?
Who and what is your community and how can you nurture it?
Work and financial
What are your most important financial priorities?
What are you interested in doing to protect and nurture your physical, emotional, and mental health?
What do you want to learn for the sake of learning?
Peace of mind
What are you interested in doing to have greater peace of mind?
In service of helping your process, you can access our Goals course for free.
Values are the lens through which we see the world. They help inform how we spend our most valuable resources of time, attention, and money.
The more we can sharpen our focus and align our spending with our values, the better off we become.
To help you clarify your core values, you can access our Values course for free as well.
Taking the time to revisit your goals and values will position you to dig into your cash flow and budget to identify any opportunities to make changes. It will help you know if you need to cut your retirement spending.
Optimize your cash flow
How often do you review your cash flow?
When I say “review,” I mean logging into your financial accounts and looking at all the transactions. Every year, there are new things for us to spend our money on. Sometimes, these things are of value. Other times, we sign up for something, stop using it, but keep paying for it. I don’t want you to fall into that trap.
However long it’s been since you reviewed yours is how far back I want you to go. If it’s been a year, look at the previous 12 months worth of transactions. Again, you’re looking for expenses you can easily get rid of. When you find something you’re not sure about, cut it out. Should you miss it, you can always add it back in later.
Revisit your budget
It’s important to have a pre and post-retirement budget. So much changes when we move from full-time employment to retirement, and we must update our budgets. The most common ways we overspend are on our housing, vehicles, and eating out.
When you’re retired, every day is Saturday. While this is awesome, it also makes it easier to overspend.
Before I go any further, know this; I don’t want or expect you to take a vow of poverty. It’s my desire to help you be comfortable with your lifestyle and confident in your finances.
That being said, can you find opportunities to reduce your spending by 10%? Look at each of your budget categories and see where minor adjustments are possible. Once you’ve identified opportunities, make the changes. Again, you can always add them back in later.
Consider additional guaranteed lifetime income
A guaranteed paycheck creates peace of mind. Peace of mind is what we’re all after.
How much guaranteed income do you currently have? We most commonly get this type of income from Social Security and pensions. It’s a good rule of thumb to have enough guaranteed income to cover your fixed expenses.
If you’ve got a shortfall between your current guaranteed income and your fixed expenses, an annuity could be a solution.
Too often, people either go broke by spending too much, or they live hand to mouth because they’re terrified of running out of money. I want you to find your happy medium, or just right.
Consistently making sure your spending is aligned with your goals and values will position you for long-term financial success. It will help you get a good night’s sleep.
If you’d like to dig deeper, check out our Retire Happily course.
If you’d like to have a no-cost conversation about your retirement income, connect with one of our Certified Partners.
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