Preparation for collection Part one: shopping
I’m preparing to retire. No, I’m not retiring anytime soon. But I’m a financial planner as well as an investment manager, so I plan. Something as big as retirement needs to be planned in advance. Over the next couple of weeks, we’ll look at what you can do about your plan. This won’t be an exhaustive list, just the basics.
This week we talk about spending. Shopping can be a stressful task for some and a joyful activity for others. I find it quite satisfying. No matter how you relate to grocery shopping, the truth is that you will be spending money in retirement.
One of the first questions we ask people when they enter for retirement is how much they plan to spend monthly in retirement. Very few can answer with confidence. A great place to start is to look at how you spend now. So, we ask how much they are spending now. Again, very few know. This tends to drive my business partners, Michelle and Brittany, crazy. You see, they know, more or less to the penny, how much they spend. They have tracking apps, spreadsheets, and they save their receipts from everything. (Yes, they know how abnormal they are!)
I’m proud of them, but I don’t do it alone. For me, what works best is to periodically collect all that data, make sure everything is okay, and move on with my life. I am less proud of myself, but I am happy about it. Different levels of monitoring can achieve the same goal if done with a purpose. But everyone must satisfy certain truths to be useful:
- While you may not keep an eye on your expenses every day, you need to look at them regularly enough to see if you are going astray.
- Periodic checking can help detect someone accessing your accounts without your permission.
- You must have access to your data. Can you, relatively quickly, access your bank and credit card information? Do you have ways to know where those ATM withdrawals went?
- You need to make sure your spending is low enough that you have money for future spending needs, including short-term goals and retirement.
If you know what you’re spending now, you’re in a good place to figure out (if you haven’t already) what you’ll need in the future. Yes, some expenses will decrease or disappear completely, but other expenses will increase or be added to the budget.
Next week we will look at the revenue side and talk more about expenses. At least I probably will, but since there’s a lottery draw tonight, I could go to Austin to collect my winnings.
May Ukraine remain free.
Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls-based pension planning and investment management firm and author of Investments in the real world.