living expenses

If These Walls Could Talk (About Retirement)

photo shows four small model houses in the grass in decreasing size left to right

It’s generally a good thing when more cash is coming in than going out.

When our planned retirement income is greater than our expenses, we have the basis for a solvent retirement. The equation could be stated pretty simply: income > expenses.

The bigger part of our work and time and energy is devoted to striving to build your capital. More capital means more cash flow from your capital. We’re trying to get you access to the income you’ll need and want.

But lifestyle decisions may have a bigger impact on our finances, by way of expenses—that other side of our equation.

I recently decided to buy a different home, selling one I had originally purchased for a life chapter now ended. There is no sacrifice involved: the new place thrills me, although it is less than half the size of the old one. It actually feels like an upgrade to my quality of life.

The new place also features less than half the utilities, taxes, maintenance, insurance, and other expenses. Those add up to more than $1,000 in savings per month for me.

When downsizing helps you wipe out mortgage debt, that might improve your annual cash flow by thousands of dollars.

The effect of this lifestyle change on my retirement picture is amazing. Projected Social Security benefits cover a larger fraction of the budget. So a reduction in my need for income produces a much larger reduction in the capital I need to retire comfortably.

Reducing expenses means our money goes farther. Perhaps it means we can retire at a younger age or live with greater flexibility.

Clients, I still intend to work to age 92. And I’m looking forward to a new chapter where my living arrangements make more sense to me.

We are happy to talk with you about your retirement plans and planning, whenever you are ready. Email us or call.

The Joy of Being Cheaply Amused

© Can Stock Photo / outsiderzone

Once upon a time, we went out on a Friday night – to the dollar theater. This was a discount affair, where good movies – not prime, first-run movies – could be seen on the big screen, for a dollar.

In the ticket line, we happened upon friends and clients, recently retired. They told us it was a regular part of their entertainment. They also hiked the trails at the state park, played cards with friends, read books from the library, and liked to watch the sun set over the river.

He said, “One of the things we had to learn early in my teaching career was the joy of being cheaply amused. We were not making much money, and did not really have a choice.” Even in retirement, on a good pension and with plenty of resources, those habits stuck.

That phrase struck a chord with me. I had long noticed that those who feel compelled to keep up with the Joneses, or whose happiness seemed to depend on shopping or acquiring things, were difficult clients to work with. Those traits are connected to a general desire to always want more.

In contrast, the joy of being cheaply amused seems to correlate with simpler lifestyles, longer-term orientation, and a greater sense of contentment.

This has a huge impact on lifestyles in retirement. The conundrum is, those who are cheaply amused tend to be the ones who can afford the bucket list trip to Europe or Alaskan cruise, to be generous in helping children and grandchildren, who have money for really significant activities.

In other words, some of the most successful retirees we know have grown into being able to spend well. Not having a lot of money starting out in life is good discipline for being thoughtful about spending later on.

Clients, if you would like to talk about this or anything else, please email us or call.