There are three phases in retirement spending. Ted Jenkin, CEO of oXYGen Financial in Atlanta and author of “The 21-Day Budget Cleanse” says, “there is typically an initial three-to-five-year period of retirement ‘jubilation,’ where many retirees overspend, often with more frequent travel as they start checking off their ‘bucket list’ goals. That’s usually followed by a longer period of ‘stabilization,’ when spending normalizes for the next decade or so [and] the last spending period the ‘five-mile radius,’ when older retirees mostly stay closer to home and their spending (except for health care) typically decreases” (nextavenue.org). Understanding your retirement plan and investments will allow you to spend your money more wisely. With life expectancy reaching 20 years after retirement, smart spending can help maintain your set lifestyle. Jenkin suggests in the first year of retirement to track your daily spending with bank apps, and to pay your bills through one bank account. This allows you to track your money and create a budget for the future years and shows exactly what you are able to afford (nextavenue.org).
When considering what to spend your money on, you should spend it on things and ideas that enhance your life and will continue to add value to many more years. Jenkin asserts, “continued education of any kind, from developing new professional skills to enhancing old ones, is almost always a positive way to spend retirement money” (nextavenue.org). Jenkin also suggests that investing in technology training is money well spent. He says, “the cost will likely pay itself back many times over; keeping up with new technologies can ultimately save retirees money, time, and frustration” (nextavenue.org).
Enjoy your savings on things and activities that bring you pleasure. Money is well spent on experiences, relationships, and memberships. Jenkin asserts, “Great experiences tend to bring far more happiness to retirees than accumulating lots of expensive stuff” (nextavenue.org). “Paying for travel to visit children, grandchildren, or old friends from high school or college — even out of the country — is often money well spent,” said Mark Woodward, founder, and CEO of KANA Private Wealth Group (nextavenue.org)
Understand that living for 20 more years is far more important than fancy, costly things. Don’t waste those hard-earned dollars on a new, fancy car, especially if you have a newer reliable one that maybe no longer carries a car note. Jenkin notes, “buying assets which quickly depreciate is one of the dumbest things a retiree can do” (nextavenue.org). Do not over-support grown children because it prevents them from understanding the concept and importance of financial independence. JB Bryan, owner of JB Bryan Financial Group warns, “if you indulge your grown son or daughter, your child will be less inclined to save and invest for retirement” (forbes.com). Do not waste money on lottery tickets, they are not investments, just chances at luck which turn into costly bad habits. That money could be better saved or invested in higher-yielding returns. And lastly, don’t forget to put money aside for one-time expenses, thinking ahead of a possible wedding or help with home purchases for the kids, or college funds for grandkids. Jenkin warns retirees to think of these expenses when it’s far too late (nextavenue.org).
Basically, plan for the basics, budget for larger one-time expenses without overindulging your heirs. Enjoy, experience, and invest in things and activities that enhance your health and life. Memories and experiences are far more valuable than material items.