Living Beyond Your Means Destroys Your Secure Retirement




Living Large Will Rob You of the

Retirement You Deserve


Successful retirement preparation and planning is directly dependent on solid financial management throughout your working years.

Failure during pre-retirement years means failure during retirement is all but certain.

The first driver of successful financial management and retirement preparation is to keep your living expenses persistently below your income.

Money from your income that you save after expenses are covered is the only way a career person can reliably build wealth.

That excess cash becomes the cement of your financial foundation.

And those dollars, invested properly, will throw off more cash every day of your life.

But if you live paycheck-to-paycheck, you will doom yourself to financial instability. And therefore you’ll rob yourself of the peace of mind you gain from knowing you’re building a brighter financial future.

The fact that living beyond your means steals your financial tomorrow applies to both pre-retirement and retirement years.

But retirement poses far higher risks.


Once you retire, your career-driven income goes away, reducing the margin of safety you have to bounce back from occasional periods of living too large.

You are instead reliant on income streams that are fixed, and an asset base that may be declining based on the planned withdraws you’re making. And make no mistake, you need to have a specific withdraw strategy to guide your withdraws, in line with your written retirement plan.

There simply is no capacity to live beyond what your plan will allow.

The risk is that you’ll run out of cash during retirement, which would be absolutely devastating.

It’s so scary that research shows running out of money in retirement is the number one fear of many future retirees.

A study done by Transamerica, and reported in the Washington Post, shows the widespread depth of concern.

The fear of retirement poverty is real.

After all, there are no do-overs once you’ve entered your golden years.

Avoiding this fate starts with a solid, realistic plan that you begin funding as early as possible.

One of the main reasons people lose out on a secure retirement is that they forego the benefits of a formal plan. They close their eyes and hope somehow things will just work out on their own.

That almost never happens.

Retirement planning and preparation is hard. But what can provide the needed perseverance is being motivated by bringing to life the retirement you envision and deserve.

With the motivation of a bright, shiny future, you now have an important success ingredient: your Why.

When it’s clear why you’re doing something, it becomes much easier to make long term sacrifices.

And this takes us back to the financial scourge of living beyond your means.

Wasting cash is often done without much thought. And what’s even worse, most overspending doesn’t give you the benefit or happiness equal or larger than the loss of money.

You don’t get value from that spending, but you harm your financial future.

What’s powerful about controlling your expenses — keeping your burn rate below your income — is you’re guaranteed to build wealth that you can use for retirement.

Even if you take what you save, and dump it into 5-year bank CDs, you will build some level of wealth.

Increasing your income is also a great wealth building lever, but it takes longer and results are not guaranteed.

A dollar saved today delivers both immediate and long term benefits.

The benefit for today is that you increase your asset base that can be tapped during retirement. The benefit for tomorrow is that every dollar will throw off more cash as long as you leave it in your asset base.

An incredible double win.

My aunt and uncle did a remarkable job controlling expenses during their pre-retirement years. So much so that, despite a middle class income, their retirement assets were $1.1MM in today’s dollars.

An enviable sum.

Not only that, they began retirement with their assets, income, and expenses perfectly aligned as detailed in their financial plan.

If they’d stuck to the plan they would have never run out of cash. In fact their asset base would have remained relatively intact as pension, Social Security, and investment income would have covered their projected expenses, even with a nice inflation hedge.

Reality didn’t turn out that way. Their asset base eventually eroded to 90% less than projected.

One main reason is that they eventually lived way too large in retirement.

Not only did their liquid asset base crater by half due to tragic investments, a health related event for my aunt changed their retirement game completely.

Their miss was that they did not adjust their plan or their spending to reflect the reduced assets or the financial impact of my aunt becoming a paraplegic.

The only thing that saved them from becoming penniless is that they sadly both passed away much earlier than originally projected.

In an unfortunate way, they lucked out.

But had they lived as long as expected, that painful number one fear of running out of money would have become their reality.

They would have been forced to live at a standard substantially lower than they both deserved, given their pre-retirement planning and sacrifice.

Health crises during retirement can be both emotionally and financially devastating and, unfortunately, they’re all too common.

With $1.1MM in assets, and a plan and lifestyle that should have kept them financially balanced, it’s hard to believe that their retirement could deteriorate into such a train wreck.

While living too large was a main driver, it was a symptom of several problems.

Relationship problems.

Emotional issues.

Unnecessary complexity in their investments.

What’s really regrettable is that had they acknowledged the impact of their changes right after they’d occurred, they had the depth of assets that would have allowed them to rescue a secure retirement.

Most retirees are not as fortunate to have that recovery capacity.

And, sadly, much of their overspending provided them little value compared to the dollars wasted.

Hanging on to a boat and home too long that could never by used again due to my aunt’s condition.

Buying duplicates upon duplicates of things they didn’t need from TV shopping networks.

Becoming nearly 100% dependent on dining out instead of figuring out less costly options.

While every situation is unique, the commonality is that they senselessly let their expenses grow to well exceed what their income and assets could support.

Then they filled the gap between means and wants with credit card debt, eventually swelling to a $60,000 balance. Interest alone consumed 40% of their income.

The thing with living beyond your means is that it cannot be sustained indefinitely.

Unlike a government that can simply print more money, we individuals are eventually forced to bring income and spending in balance.

The bill eventually comes due.

Tragically for many, the bill for decades of excess hits just before retirement.

When there’s no time, and no capacity, to recover.

You, and if you have them, your significant other and family members, simply deserve better.

Regardless of where you are today in your retirement planning preparation, the most important thing you can do is to reduce your expenses, and use the dollars you free up to build financial security for the future.

Yes, it’s not very sexy. Yes, you may feel deprived or have to say no to somebody for an expenditure they’ve become used to.

Yes, advertisements and human nature will continue to beckon you to buy it now because you deserve it.

But if you live beyond your means for too long, no one will rescue you.

If you’re going to have a secure retirement it’s entirely up to you because Retirement Is All On You!


⇒Next: 6. Complexity Causes Confusion


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