Step 1 to Make Your Money Last

Ageing, College, Family, Financial Security, Relationships, Retirement, Saving, Student Loans

February 06, 2020

I hear from so many of you who are at least 50 that you are worried you won’t be able to have a great retirement. And those of you who are retired are anxious if your money will last.

The Ultimate Retirement Guide for 50+ is packed full of everything you need to live the retirement you want and deserve. But I am not going to sugar coat things: It’s going to require that you stand in your truth and make some changes.

And that starts with making you, and your retirement needs a priority.

The only way to build a secure retirement is from this day forward to demand of yourself that every spending decision must work for your retirement, not undermine it.

Don’t tell me you don’t have choices. Of course you do!

Let’s start with the kids.

If you still have young kids at home, getting them through college may be a financial hurdle giving you the terrors. It’s why you insist you don’t have the ability to save more for retirement or save period. Stop it. A college education does not need to break your family’s finances. It is a choice you make.

Get help finding schools where you don’t have to go into debt and your kid will emerge with a manageable amount of debt from federal student loans. (Tip: A graduate whose total debt is less than his or her first-year salary after graduation should be in great shape to get his or her student loans paid off in a reasonable amount of time.)

Maybe that’s a fantastic private college that is so eager to have your kid they pony up a great financial aid package. Or it may be a state university where tuition is more affordable. Moreover, there are many career paths that require skills that can be learned in a 2-year associate’s program or other training. Is some sort of post-H.S. degree important? Absolutely. But as a graduate of a state school, you will never convince me the only way to be successful is to go to a prestigious private school that crushes your family’s finances.

For those of you with adult kids, I see so many of you are making the choice to keep supporting them in some way. For some, you let them live with you rent free, when if they paid some rent it would give you money to get ready for retirement: paying down debt faster, maybe adding more to retirement savings. That’s not being mean or selfish. It’s just the opposite. You are treating your adult child as an adult.

Or you help with their rent, or their car payment, or you keep them on your cell plan, streaming plan, and health insurance. And you tell yourself “it’s only” some small sum, so it’s not a big deal. You are so very wrong. If you redirect $200 a month from adult kids to retirement and keep it up for 10 years you will have more than $30,000 for retirement, assuming a 5% annualized rate of return.

Eye-opening right? Okay, so here’s this week’s challenge: Add up all the ways you are helping your adult child with wants, not needs. Financing wants is out of the question. So cut those. And I encourage you to discuss with your adult children a timetable for when – and by how much – you will start to reduce your support for needs.

To be clear, an apartment of their own that you help pay the rent on is a want. An apartment share is all they need if they are eager to be independent. Same goes with a car. Are you pitching in on a new car (want) vs. suggesting they finance it all on their own by purchasing a much less expensive used car? And don’t you dare help pay for a grandchild’s after-school programs or nanny if you are not secure about your retirement.

Now let’s turn to your personal spending habits.

By the time you are in your 50s and 60s, many of you have fallen into a pattern where you keep upgrading your life beyond what you need. For instance, if you need a car that is one thing, but given the sad statistics on car loans –the average payment for a new car is now $550 a month and lasts nearly six years — it’s clear that people are buying more car than they need.

Or many of you continue to live in a too-big home with a too-big property tax bill, rather than right-size your home so you can be financially secure. Holding on to the big home for the two or three times the family gathers for the holidays? Downsizing to a home with one (or two) fewer bedrooms will be a big money saver. Even if you graciously agree to pay for the family’s hotel accommodations when they come to visit during the holidays.

I am adamant that anyone who wants to build retirement security commit to living within their needs but below their needs. Do you need to go out to a nice restaurant every weekend or could you keep that to one or two weekends a month? What’s the bar/wine tab like? Cut that in half and what happens?

If you will seriously take a look at all the different ways you can spend less on others and other “things”, I think many of you will find you might have $200, $500 or more extra each month to put toward your retirement planning goals.

In next week’s post, I will share some of my top ideas for what to do with your extra cash.

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