Inflation and Spending In Retirement

When it comes to spending in retirement, I’m a defensive guy. I like I like playing defense. I think defense wins championships, and sometimes you’ve got to get defensive when you look at things like today’s grocery prices. Because grocery prices are one of the most visible ways a retiree will feel inflation.

It’s like talking to my dad or talking to different clients I have. Last week I felt like I bought the same stuff and it was $14 cheaper. Now it’s $14 more. So, you start looking into your grocery cart and you’re like, “Do I need this? Do I want this?” And even when inflation is relatively low, increased weekly spending can get quite unsettling when the pressure is on your grocery bill.

I mean, retirees should not feel guilty for noticing it. Everyday costs are a part of the plan, and they must be managed. I mean, the Dollar Store is now the Dollar-Fifty or the Two-Dollar Store. The “dollar menu” at McDonald’s is now the $3 menu.

Rising costs really can stretch consumers’ budgets. You just have to plan for things like inflation, and know that things will get better. Just relax and follow your plan. If you have a budget of x, y, z for your grocery bill, use the budget of x, y, z. Don’t detour, just make a few changes. Take a hard look at things like how much stuff you throw away every week that you don’t use. That’s what you should be paying attention to. Wasted food. Like why are you buying five heads of lettuce when you’re only using two?

When it comes to spending and inflation, you have to come up with a plan for real life. Because there’s fake life, there’s lucky life, and there’s “I hope” life.

For instance, I was playing a golf match against this guy two weeks ago. He hit the tree three times in one hole and made par three different times. He pulled it left, hit the tree, run it out in the fairway all three times, chips it up there, makes one putt for a par on a par five.

And that just doesn’t happen. That’s just pure luck. He didn’t plan it that way. The Universe just came together and this is what happened. But the next hole, the Universe paid it back. He hit the ball in the water, made double bogey. It’s amazing how what comes around goes around.

If you’re trying to live your life on luck or hope, it’s not going to work out real well when your spending plan is like, “I hope I have enough to pay for this next week or I hope I have this much money saved, or I hope the market goes up 25% in the next year, because that would get me to my number.”

When it comes to spending, separating the fixed essentials, the flexible lifestyle spending, and the one-time surprises is real life. And you need to factor in travel, taxes, repairs, and family unexpected needs, too.

Important data matters. Like your bank account often tells the clearest story at the end of the day about your spending. When’s the last time you did a spending check on yourself? When I meet with my clients, I hand them a spending sheet. I ask them, “What are you spending a month, or what are you spending a year? What do you think you’re spending versus what are you actually spending?” And you know what? Over 95% of them aren’t even close to the real number. Most of them think they are spending about $3,500 to $4,000 a month, but they’re over $5,000 to $6,000.

And that’s the thing; you don’t pay attention to the ins and outs. You’ve got taxes, gas, groceries, house bills, the water bill, the electric bill. With some of those expenses, you need to take a 12-month average. So, we fill out a spending sheet together and look for ways to cut back that won’t affect the joy of your life. Because that’s the most important part, is enjoying life, living life to its fullest. But you also have to take care of yourself. Have that plan again.

Plan is like the word of the day here today. For instance, do you really need a home phone or land line? Well, maybe AT&T or Verizon have a cheaper package bundled together. You get to do an extra activity for yourself; you need to explore deals. There are so many different avenues out there that you can save $15 here, $20 a year, $100 there.

Don’t be like a lot of people out there and just procrastinate and say, “No, I’m fine now.” I’m fine now? If you think about it, you’re 60 years old. If you save $100 a month just by making a few changes to a few different things, that’s $1,200 a year you’re saving. In 10 years from now, with interest, even at 4% interest rate, that’s $15,000 you’ve saved in a 10-year timeframe!

And that is the thing about spending money, because we you save $100 here, it gives you an extra $100 somewhere else to spend to enjoy yourself. Maybe a vacation or a night out with a spouse or a friends and family. And that’s what life is all about.

Money is important. Money comes; money goes. But if you plan it properly, accounting for spending and inflation, you can have the retirement income that’s going to take care of you.

We are here to educate you, whether it’s on spending, inflation, income, annuities, CDs, life insurance, or Medicare. In fact, Jeff Conyers, my associate here, has forgotten more about Medicare than anybody will know, and he can help save money and properly plan it. We’re trying to fit all the pieces in the budget to learn about you, so we can educate you on what you’re actually looking for, because no two situations are the same.