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7 Practical Ways to Avoid Running Out of Money in Retirement

7 Practical Ways to Avoid Running Out of Money in Retirement

Retirement: it’s a goal we all have and spend most of our working lives saving for. But many people worry about running out of money during their retirement—and with people living longer than ever before, it’s a relevant concern. But there are several steps you can take to make sure you can enjoy retirement.

Here are seven practical ways to avoid running out of money in retirement.

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1. Keep earning money.

You may have stepped away from the full-time career you’ve had for the past 40-plus years, but that doesn’t mean you have to completely leave the working world. Seriously consider finding a stress-free part-time job that still allows you to enjoy your hobbies, friends and families. Besides earning a little money, the job will also keep your brain sharp. Another way to earn money in retirement is to sell things you no longer need, such as a second (or third) car or other things around the house that you haven’t used in years.

2. Monitor your assets.

Keep a close eye on your investment portfolio and how it fares in the market. This isn’t something you need to do every day or even weekly, but at least once a month find out how much your assets are worth. If you notice a negative trend, you’ll be able to take action more quickly and avoid any unpleasant surprises. Another asset value to monitor is your home. Make sure to keep up on maintenance so its value stays with the current market. For most people, their home is their biggest asset.

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3. Invest for income.

Financial advisers usually tell people to become more conservative in their investments as they get older. While that’s good advice most of the time, it’s also important to invest for income—find a product that will not only deliver back on its investment, but will also earn you a little extra.

4. Spend less money.

Okay, that’s a no-brainer, right? But it’s something you need to be conscious of. If you followed a budget before you retired, do the same now. You’ll need to adjust it to note the changes in income and expenses (hopefully you’ll be spending less on clothing, gas and other areas related to working). If you’ve never had a budget, it’s not too late to draft one. Think about how much money you have coming in each month and determine how you’re going to spend it, and how much you may need to dip into savings.

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5. Save more.

Another no-brainer, but it’s true: if you save more money before you retire, it’s less likely you’ll run out of it once you stop taking home a regular paycheck. Look for ways to stash more cash in your retirement savings accounts, whether it’s a 401(k) through work or an IRA. Putting away a few extra dollars every pay period can add up.

6. Buy long-term care insurance.

Nursing home costs wipe out many people’s life savings. One way to avoid this is to plan ahead and purchase long-term care insurance, which covers costs not paid for by health insurance, Medicare or Medicaid, when you’re in your 40s or 50s when the premiums will be cheaper. This insurance will help protect your assets if you wind up in a nursing home and with 60 percent of people over age 65 requiring some type of long-term care services during their lifetime, it’s not a bad investment.

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7. Delay collecting your Social Security.

If you can, wait until 70 to collect Social Security. If you can, delay accepting your monthly Social Security payments until you reach age 70. By doing this, you’ll receive a higher amount each month.

By taking these simple steps, you’ll be less likely to outlive your savings.

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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