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For some people, the arrival of retirement day feels a little like jumping off a cliff into the unknown. All of a sudden the safety net of a regular paycheck is gone and the future looks a little scary. For your whole life, you’ve been told to save, save, save…
Changing your mindset about money is a gradual process, but it starts with a spending plan.
Roughly, your needs and goals will fall into three categories:
Your essential spending needs are the necessary monthly expenses
You may not have kept track of your grocery bills or periodic repairs to your home pre-retirement but everything counts now. Don’t forget that amount of cash you routinely get from the bank machine to pay the pet sitter or tip the delivery person.
Under the heading of important goals would be buying a new car or travel that is not essential but important to you such as visiting the grandchildren.
And aspirational goals are blue sky bucket list items like buying a boat or taking a European vacation.
After you go through this process your next thought might be, “Where is all this money for the plan coming from?” And that’s when you have to make the transition of thinking of money as “income” and start thinking of it as “cash flow.”
Social Security payments start when you turn 70, but you can choose to draw them as young as 62.
You will set up monthly withdrawals from these pots to go into your checking account, which you should now start to think of as your “spending account”.
You want to take money for your spending account from the most efficient tax category, which is usually a high-yield savings account or money market fund.
This is where a certified financial planner (CFP) can be vital. A CFP will collect all of the information on your financial assets and fit them with your spending needs. This will help them to arrive at a figure that meets your monthly requirements.
If you have an unexpected expense, such as replacing a deck or purchasing a new car, keep in mind that it’s OK to touch your principal. That’s why you saved all these years!
There will be “blips” in your financial plan over the years. Some years, you may need to replace an air conditioning system and you spend more than normal. Other years will be smooth sailing.
You will realize over time that in some categories you’re actually spending less than you budgeted because now you’re actively thinking about each spending decision.
As you start to adjust your thinking about money, you’ll find your peace of mind increases. You’ll realize that , instead of feeling like you’re jumping off a cliff into the unknown, you’re actually taking control of your life.
And you’re buying yourself the most valuable thing you possibly can: your freedom.
Ruby helps families get organized and enjoy financial peace-of-mind.
Managing accounts from multiple sources can be a pain. Ruby lets you see them all in a single view. We’ll also send you weekly summaries so you can watch what’s coming in and going out, and look out for fraud or missteps.
Ruby helps you identify trends and history, so you can make a realistic plan, and keep things solid going forward.
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