When Oh When Can I Retire?

financial planning for retirement mid-life financial planning Jul 27, 2021

By Glenn J. Downing, MBA, CFP®

You want to retire in a few years, right? And you know you haven't saved enough. But there are bills to pay, and at the end of the month there’s nothing left. In fact, there’s often a shortfall. What can you do?

Short answer: a lot. If this is your situation, you’ve let your money be your master rather than your servant. To turn it around so that your money accomplishes what YOU want it to is going to require a change of thinking and some effort on your part.

Necessary vs. Discretionary Spending

Here’s the change in thinking: In your mind separate out spending that is necessary from spending that is discretionary. In other words, what do you need to spend for food, clothing, and other necessities – car payment, various insurances, etc.

And then think about what is discretionary. What do you spend by choice and not out of necessity? Think back over just this last week. What did you spend? Was it on necessities? Or how much of it was discretionary? Because if the budget doesn’t balance, or you’re not saving enough, it is the discretionary spending that gets cut back.

Cut the Fat Out

To make your budget balance begin with cutting the fat out of your spending. Here are some do-now suggestions:

If you still smoke, quit. People have enjoyed strong tobacco for millennia. But tobacco is not a necessity.
Cut back on buying alcohol. Now I’m not a teetotaler - I enjoy a beer as much as any other guy. But beer and liquor are not necessities. Don’t waste money on something you’re- forgive the expression – going to literally piss away!
Stop going out to eat so much. Don’t you have a kitchen at home? Go to Publix and cook freshly for yourself and your family. You’ll eat healthier and have more money left in the checkbook. Let eating out be for a treat or a special occasion.
Stop going to Starbucks. Want to know how to save $100/month or more? Buy a thermos. Brew a pot in the morning. The coffee will stay hot all day.
Stop buying lunch out. Bring it from home. You’ll save hundreds each month. At $12/meal, 20 workdays, that’s $240/month right there.
No more lottery tickets. This is on my top 10 list of money-wasters. I wrote a separate blog piece on this. The lottery amounts to a voluntary tax. Don’t be the one to pay it.
Ladies: can you paint your own nails? (I know I'm on really thin ice here!) See what you can do to cut back on the salon services. Let me tell you – he’ll love you just as much with an imperfect manicure.
If the numbers still don’t balance, you can cut your own grass and clean your own house. Children should help out and have chores.

And Dear Readers, as you work through this list and find that you have some bitter medicine to swallow, best to take it in one big gulp.

Challenge your Fixed Expenses

Once you’ve done these, challenge your remaining (fixed) expenses and get out of debt!

Look at a refi. Rates are at historic lows. Get rid of any variable rate mortgages now. We currently have a great opportunity to lock in historically low rates – don’t miss it!
Shop your auto and homeowner’s insurance policies. I recommend you use a broker who can shop the market for you, rather than an agent who represents only one company. Make sure you’re properly insured, but not paying for features you don’t need.
Look at your cable bill. Drop all the movie channels you don’t need. Focus on the word need. If you tell Comcast you’re going to cancel the service, they’ll miraculously come up with a year-long promotional rate.
Challenge your mobile phone bill. Make sure you aren’t paying for features you don’t need or covering family members who can well afford their own service.
Challenge your subscriptions. These used to be the newspapers and magazines, but are now Amazon Prime, Spotify, Hulu, etc. Drop what you don’t need. Emphasis once again on need.

Aggressively Pay Off Debt

By now you should have freed up lots of dollars to aggressively pay off debt. Start with the smallest bill and pay it off first. Give yourself that first victory. Then roll that payment onto the next smallest bill, and so on. In this way you go from one victory to another.

Do you have anything to sell on Ebay or in a garage sale? That’s new-found cash you can put toward debt repayment.

Save Like a Madman!

No one ever retires and looks back and says, I saved too much. I should have spent more. This just doesn’t happen. Retirement security comes from the size of your investment account.

Establish an emergency fund. This should be 3-6 months of bare bones budget, depending upon the number of income sources. It is not a matter of whether but when you’ll need it. This is simply cash on hand to keep you from going into debt and disturbing long-term savings.

Once you’ve done these, your budget will most likely balance, and you will have extra cash flow to allocate toward future goals. It if doesn’t, then you may need to dramatically alter your lifestyle. Maybe sell the boat, or the house you can’t afford. If you do all these things, you’ve put yourself in a great position to retire from your job, and prepare for life’s next adventure.

Questions? Thoughts?

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