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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 retirement questions. Say goodbye to the oversimplified advice. This show's about getting to the details so you can determine what is right for you. My name is Mike Decker. I'm a licensed financial adviser and fiduciary.
Speaker 1:With me here is David Franson. He'll be reading your questions, and I'm gonna do my best to answer them. As always, text your questions to (913) 363-1234. David, let's begin.
Speaker 2:Hey, Mike. How do you figure out your cash flow in retirement?
Speaker 1:This is a tricky one because some people will spend more when they retire, some people will spend less when they retire. And it just depends on really the stage of life, how they want their retirement to look like, depends on if they wanna travel a lot, if they don't, what their hobbies are. There there's a lot of nuance here. So when you get this generalized statement that you're only gonna spend 80% of your salary in retirement, or you're gonna spend more in retirement, ignore it and ask yourself, what does retirement look like to you? And the answer is not sitting in front of the TV watching it all day long or Netflix.
Speaker 1:You're binging your favorite shows or whatever. The answer is not, I'm only going to garden, or I'm only gonna play golf, and I've got my fixed fee golf membership, and that's that. Retirement is not, I'm just gonna travel all the world all the time, and that's gonna fulfill me. So what I typically recommend people to do is to see if towards the end of your career, you can take a fake or a testing retirement, kind of a pseudo retirement.
Speaker 2:Yeah. How would that play out?
Speaker 1:Take a month off, simulate the retirement that you want, and see if it works out well or not.
Speaker 2:So play golf every day for a month?
Speaker 1:Yeah. See if it really brings you fulfillment. You've gotta have purpose in retirement, and that purpose may cost you more money. It may cost you less money. But you have to have a reason to get up in the morning, whatever that reason is.
Speaker 1:And then start breaking down your expenses based on your expected or your committed expenses. So your average cost of food and groceries, your cost for utilities, and your real estate taxes. Mhmm. And get a baseline for how much you need to put in there for your car. So when I say your car, maybe there's some maintenance there.
Speaker 1:Maybe you're gonna be having a new car purchase in the near future. Just whatever it might be. And I'm not saying you don't wanna be taking auto loans out. I'm just saying, what is the kind of basic foundational committed expenses? Like, you need this to live your most basic version of your life.
Speaker 1:Then figure out what your discretionary, your fun spending is gonna look like, and divide both categories. At that point, then you can start to say, okay. Well, maybe in phase one of my life, when I say your your travel years, whether you're traveling or not, that's when your discretionary spend
Speaker 2:is a little
Speaker 1:bit higher, or you can have a little bit more fun. Maybe you have that for a couple of years, and then you scale back. Maybe you don't scale back, but you don't wanna just guess and wing this.
Speaker 2:Alright. That could be dangerous.
Speaker 1:Yeah. You don't want lifestyle creep. So retirement, there's FOMO, fear of missing out. It's like, oh, I'm not really fulfilled, I'm gonna spend more money or all these other things. You don't want that to be an accident.
Speaker 1:You want to start simulating retirement. You wanna start asking, this is really what I think I'll be spending in there, and really put some effort into it. I do recommend everyone to not be on a budget, but to be on a cash flow app. Now we have our own cash flow and capital, which you can find it on Apple. You have to put cash flow and then the ampersand, you know, the fancy a
Speaker 2:Oh, yeah.
Speaker 1:And capital to find it. Just do a and d. You're probably not gonna find it because it's not a huge app. We made it, but it's not like you're you're top of the charts or whatever. Sure.
Speaker 1:But we designed it to help people develop a healthier relationship with their money and be more in tune with their actual cash flow so they can be more aware of what retirement would look like. But any cash flow system, it's not like you're on a budget. You're not putting yourself on allowance. You're trying to raise the awareness of where your money is actually going so that you can plan accordingly for retirement. Too many times people have come to the office and I say, how much does it cost to be you?
Speaker 1:Say, I don't know. They throw out an arbitrary number. It's like, no. Let's just pause real quick, take a moment, and really start to understand what is your cash flow gonna look like. Are you gonna be traveling more?
Speaker 1:Are you gonna see the kids? Are you not gonna be seeing the kids? Do you want charitable distributions? Are you used to paying maybe you're a sole proprietor. You're a business owner, and you're used to paying taxes out of your own cash flow.
Speaker 1:Maybe that's gonna change a little bit because of your dynamics are shifting. There are so many variations here that don't do the cliche everyone's advice situation. Figure out your specific situation. Now shameless plug for our own promotional purposes, I guess you could say, but we did hire developers to create cash flow and capital as the app specifically for the purpose to help people develop a healthier relationship with their cash flow, with their money. Is that the only option?
Speaker 1:No. There's plenty of other apps out there. Find the one that suits you best, but start doing it so you get more in touch with your spending.
Speaker 2:Part of how that looks, getting in touch with your spending, is just seeing where everything's going. So you're physically looking at, like, oh, where did this go? You categorize it manually, right, so that you know, like, oh, this is what I spent on that. I didn't realize that.
Speaker 1:Yeah. The funniest example I hear over and over again is I didn't realize how much was going to streaming services. Oh, yeah. It's like, yeah, I knew I had Netflix and Hulu and Apple TV, and then I was doing YouTube TV, but whatever. But then when I started kind of every month, I saw money leaving into that category, because you have to manually sort every category if you use our app.
Speaker 1:Mhmm. Every month, I'm like, I don't wanna keep spending $200 on streaming services, and then you cut all of them but one. You save yourself a $150 or so, depending on which ones you cut. That's a pretty neat situation.
Speaker 2:Right.
Speaker 1:Because a 100 plus dollars a month, that can add up. Now think about that in multiple different categories. Oh, my insurance, so property and casualty or auto insurance or whatever, that's increased. Maybe I wanna start shopping around a little bit. These are things that raise your awareness, but also let you be really in tune with your spending habits.
Speaker 1:Do you spend a lot on food? Do you not spend a lot on food? What are the trends? It's not about it being right or wrong. It's not about spending less money.
Speaker 1:It's about is the price and the use of you spending money for that service still worth the price that you're spending on that service?
Speaker 2:Yeah. Some people will go out to eat a lot and, you know, eating out costs a lot of money. But for some people, it might be worth it. And others like, no. I don't wanna spend that much on food.
Speaker 2:I'm gonna go out less. Others say, I'm fine to spend that much, and it brings me great joy, so I'm gonna keep doing it. Yeah. But you just have to have that awareness.
Speaker 1:You gotta have your awareness. Mhmm. And the only way to do that is, we believe it's manual and there's a lot of psychology behind this, by the way, but it's manually so you want you wanna have all the transactions uploaded, because it's a hassle to manually type in everything. Yeah. But it's nice to just in two or three clicks, you say, oh, that goes there.
Speaker 1:Oh, that's now the category, the cash flow of that specific category and what I'm doing. You're tracking your own behavior. Humans aren't built objective. We're built behaviorally to have an emotional bias towards something. So when you have a system that helps you learn from your behavior, you keep yourself in check, basically just checking in every now and then saying, is this still worth it?
Speaker 1:It keeps us in line instead of going down the wrong path without the awareness. That's all the time we've got for the show today. If you
Speaker 2: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.
Speaker 2: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.