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Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Welcome to How to Retire On Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire On Time, which you can grab today on Amazon or by going to RetireOnTime.com. My name is Mike Decker. I'm the author of the book, How to Retire On Time. I'm also a licensed financial adviser, insurance agent, and tax professional, which means when it comes to financial topics, we can cover it all.
Mike:Now that said, please remember this is just a show. Everything you hear should be considered informational as in not financial advice. If you want personalized financial advice, you can request your wealth analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is my esteemed cohost and colleague, mister David Franson. Thanks for being here.
David:Yep. Glad to be here.
Mike:David's gonna read your questions, and I will do my best to answer them. You can always submit your questions anytime during the week by texting (913) 363-1234. Again, that number is (913) 363-1234. Let's begin.
David:Hey, Mike. How do you plan for monthly expenses and extra large purchases?
Mike:By being in touch with your cash flow mechanisms. The last thing you wanna do is to assume that you can just take money out of your accounts, your investments whenever you want, if you need something, because many times catastrophe happens also when the markets crash. You're more likely to lose your job if the markets are crashing. You're more likely to lose your job in a recession or a depression. So you don't wanna assume that you're just able to tap into anything whenever you want, and there's no consequence to that.
Mike:Right. This is why people have an emergency fund. And so the emergency fund, which typically would be in a high yield savings account, though you could blend it between high yield savings and maybe a buffered ETF, so you get maybe a little bit more growth potentially in there, but it's the idea that you know what your expenses are. That's your heating and air conditioning, your mortgage, your property tax, all of your committed expenses, what your bills are, basically to live your standard life.
David:Okay.
Mike:Then you have your discretionary expenses or your fund money. Okay? And that's kind of a threshold. Maybe you give yourself allotment of 20% on top of that. That's an arbitrary number.
David:Alright.
Mike:Some people want more, some people want less. So don't say, oh, well, Mike says 20%. No way. Yeah. Yeah.
Mike:Everyone's different. Okay? But what you gotta look at is understanding you have to operate off of a cash flow system. There's gonna be times where you spend a little bit more, times you spend a little bit less, but overall, it evens out, and the buffer is the excess money goes to your emergency fund.
David:Okay.
Mike:There could be times in your retirement where your emergency fund's bigger, you haven't needed to replace the car or the roof or your water tank or whatever it is. Yeah. And so you've got a little bit extra, then you could adjust and say, well, we don't need as much. Let's adjust our cash flow or just start spending more money. There may be times where you had to spend it all, and now you've got to kind of reassess.
Mike:Okay. Are the markets up? Could we quickly refund the emergency fund, or do we need to take another cash flow and slowly refund it? But it's a very dynamic relationship among cash flow and income, which are different things. Cash flow is the movement of the money.
Mike:Okay. Income is basically what you're taking and spending. So you could have a higher cash flow and put some of it into your emergency fund, and your income is what you would be spending. But it's it's being able to figure out those nuances. Now we developed an app called Cash Flow and Capital to help people have a healthier relationship with money to do this.
Mike:Is that the only app? No. I mean, you've got You Need A Budget, which is a great app. You've got Every Dollar by Dave Ramsey, which is a great app. You've got all different ways to do it.
Mike:Mhmm. And we built cash flow and capital with the specific intention of not being rigid by the budget, but creating custom categories, and understanding what are your committed expenses, and then what are your flexible expenses? Because it helps people understand, it doesn't matter what happens, I have to make these payments. Those are your committed expenses. Yeah.
Mike:And then your flexible expenses, that's the fun part of it. And we did a unique way that it kind of calculates that sort of system, and then every transaction goes up and you sort it through. Yeah. There have been times, like a doctor prescribes medication to people, I've had people call, I'll say, well how much do you need or want? And they say, I really don't know what my cash flow is.
Mike:I don't really know how much I need in retirement, because they have their work expenses. They have all these other things that might go away. So I prescribe to them, literally, say, get this app, go on there for three months, and then call us back. I mean, we could keep planning, but you need several months of tracking your expenses to get in touch with it, because I can't know.
David:We sort of force the user to manually track each downloaded transaction from their bank. Right?
Mike:So Yeah. You don't experience any pain when you give them a credit card. Yeah. Credit cards aren't bad. It's just you don't experience pain.
Mike:So when you take your transaction, money you've spent, and you move it over and you see that your total spendable budget goes down, you experience pain. We're trying to repurpose what we used to do, which is balance the checkbook. You're balancing the checkbook by sorting manually every single app that allows you then to negotiate, was that transaction worth the money?
David:Yeah. Yeah.
Mike:Yeah. It left you was it worth the amount that it left you at?
David:This takes me back to when I was a kid and you got your hands on some cash, and then you wanna buy something and then you're like, oh, but I have to trade this money that I like for that. Is that worth it? Yeah. And you felt pain handing it over to the cashier.
Mike:Yeah.
David:And that goes away now when you're just using your watch to Apple Pay or whatever. Right?
Mike:And you swipe a card. We wanted people to experience some pain. Yeah. A healthy pain. A healthy pain.
Mike:Yeah. So that's why I recommend apps called Cashflow and Capital. It's out on iPhone right now. It's not on Android yet. We're almost there for Android.
Mike:But whatever it is, you can do this in Excel, Microsoft Excel or Google Sheets. Yeah. But if you're not tracking it, you will never know. Mhmm. And one of the worst things you could do is to put together a retirement plan with blindfolds on incomplete assumptions, and it just it doesn't it's not good.
David:Right. Right.
Mike:Right. People will often will say, well, my my expenses are gonna go down in retirement. Nope. Yeah. Because you
David:kinda think that they would, right? Oh, the kids are out of the house, My grocery bill is smaller, or I've paid off all my debts. I don't have these payments anymore. So Yeah. You fall into the trap easily of thinking that you'll spend less in retirement.
Mike:If have more time on your hands, there's a good chance you'll spend more money. Yeah. I mean, maybe you get a membership to Topgolf and just live there. Yeah. But probably not.
Mike:That's not gonna be fulfilling. Topgolf is fun. Yeah. Right? But spending every waking moment there, it doesn't work.
Mike:Uh-uh. So anyway, consider that as you prepare for retirement. Yeah. Track it. If you really wanna get through this quickly, just download the last three to six months of bank statements, and then just start checking off, but that would be in start sorting day.
Mike:It's kind of a fun Saturday, Sunday afternoon activity that you could do to just get more in touch with what would life actually be. But you gotta you gotta sort that through. Don't go into retirement guessing. I mean, you could be pleasantly surprised, but you don't wanna risk being unpleasantly surprised. That's all the time we've got for the show today.
Mike:If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist. Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis.
Mike:Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date, go to www.yourwealthanalysis.com today to learn more and get started.