budgeting

Single Women and Longevity Risk Part 3: Planning for Expenses in Retirement

Cash Flow Planning, Financial Planning, Retirement Planning, Women and Money / By /
Planning for Expenses in Retirement

In Part 2 of this three-part blog series on single women and longevity risk, we discussed the importance of investing to supplement your income in retirement and minimize the risk of outliving your financial resources. In Part 3, we’ll explore why planning for expenses in retirement—both expected and unexpected—is essential when it comes to managing longevity risk.  

Estimating Your Expenses in Retirement

Failing to consider and plan for the various costs you’re likely to incur in retirement can lead to a savings shortfall, increasing the risk that you’ll outlive your assets. Thus, creating a retirement budget is necessary to ensure you’re saving enough and investing appropriately.

Of course, there are always uncertainties when it comes to planning for the future. Nevertheless, with the right guidance, it’s possible to project your retirement expenses with a reasonable degree of accuracy.

For example, basic living expenses like food, housing, utilities, and clothing tend to remain relatively steady in retirement and are therefore easier to anticipate. Yet other items like healthcare, travel, and entertainment often rise significantly once you stop working.

In fact, a recent report by the Center for Retirement Research at Boston College found that in 2018, 12% of the median retiree’s total retirement income went toward medical expenses. Moreover, since 2000, the price of medical care has increased at a faster rate than the overall inflation rate.

Meanwhile, with more free time on your hands, you may wish to travel more and take longer, more expensive trips in retirement. Plus, you’re more likely to spend money on other types of entertainment once work no longer demands so much of your time.

No matter your retirement plans, it’s important to consider how your lifestyle goals will impact your budget and plan accordingly. This can help you determine what size nest egg you’ll need to retire successfully and mitigate longevity risk.  

Planning for Unexpected Expenses in Retirement

In addition to the expenses we can reasonably project, others can crop up as we age and our homes, children, and spouses age along with us. Unfortunately, unexpected expenses can mess with the best-laid plans when you’re living off savings and fixed sources of income like Social Security.

Therefore, it’s best to expect the unexpected and prepare for these expenses as best you can. Here’s a list of unexpected expenses you may face in retirement:

Home Repairs & Maintenance Costs

Many Americans own their homes when they reach retirement age. (When I say “own,” I mean they own their homes outright or are still paying down their mortgage as opposed to renting.)

It’s easy to overlook or postpone home maintenance, especially if everything looks fine on the surface. But homes age just like we do, and putting off necessary repairs can become a significant financial expense down the road.

A recent personal experience drove this point home when a routine paint job turned into a major dry rot mitigation project costing tens of thousands of dollars!

When it comes to planning for unexpected expenses in retirement, here’s a best practice to prevent a surprise cost like mine: hire a professional to inspect your home for hidden problems such as dry rot, termites, mold, foundation issues, leaks, and outdated plumbing and electrical systems. Then, develop a multi-year plan to fix the problems and schedule ongoing routine maintenance.

Remodeling Expenses

In addition to the unglamorous fixes a home occasionally needs, it’s not unusual to grow tired of your home decor over time. You may decide to buy new furniture or appliances or update the exterior of your home in retirement, all of which can be costly.

In some cases, you may simply want your home to maintain its value if you plan to eventually sell it. For example, kitchen and bathroom styles tend to change every 10-20 years, prompting homeowners to make major updates.

Or you may need to alter your home so you can age in place comfortably and safely. While no one likes to think about the possibility of losing mobility, it’s one of the realities many of us must face as our bodies age.

Regardless of the impetuous, remodeling costs are common in retirement and can be substantial. Thus, it’s best to expect them and manage your finances accordingly.  

Unexpected HealthCare Costs

The first time many retirees realize Medicare isn’t as cheap as they thought it would be is when they receive a notice from the Social Security Administration about IRMAA. IRMAA, which stands for Income-Related Monthly Adjustment Amount, is an extra charge added to your Medicare Part B and Part D premiums if your income exceeds a certain threshold.

When on Medicare, you pay monthly premiums for Part B, which covers doctor services, outpatient care, and preventive services, and Part D, which covers prescription drugs. But if you’re a high-income earner according to your tax return from two years ago, the government says, “Hey, you can afford to contribute a little more.”

So, they add an extra charge (IRMAA) to your monthly premiums. And the more you earn, the higher your IRMAA charge will be.

Also, Medicare doesn’t cover all healthcare-related expenses in retirement. You’ll still be responsible for co-pays, deductibles, and coinsurance, as well as long-term care, dental, hearing, and eye care. These out-of-pocket costs can add up quickly if you have a significant health issue or need extensive care.

Again, proper planning is essential to mitigate these costs. To avoid IRMAA, you can work with a financial planner to develop a retirement income plan that keeps your taxable income below the threshold.

In addition, you may want to consider buying a Medigap or Medicare Advantage policy to defray the healthcare costs Medicare doesn’t cover.

Medigap policies fill in the gaps in original Medicare coverage, including medical care when traveling outside the U.S. Just keep in mind you’ll still need a separate prescription drug plan (Medicare Part D).

Alternatively, Medicare Advantage (Part C) offers an “all-in-one” alternative to original Medicare. However, these plans are generally in HMOs or PPOs, which may limit your access to certain healthcare professionals or facilities.

Long-Term Care

Another common misconception is that Medicare covers long-term care costs. It doesn’t. This can be problematic, since most older adults will likely need long-term care during their lifetimes.

In fact, the U.S. Department of Health and Human Services estimates that 70% of those turning 65 this year will eventually need long-term care. Meanwhile, women are more likely to need long-term care than men and for a longer duration, according to data from Morningstar.

These services can be costly—typically thousands of dollars a month in expenses. Unfortunately, long-term care insurance is also expensive, and the rigorous eligibility requirements put it out of reach for many.

If you qualify for long-term care insurance and can afford it, you may want to consider your available options, including hybrid policies that include a life insurance component. Otherwise, self-funding long-term care by saving and investing enough money during your working years is likely your best option.

Family Obligations

It’s not uncommon for adult children or other relatives to need financial help occasionally. These requests can be tough to negotiate, especially if your loved ones don’t understand the strain an unexpected loan or gift can have on your finances in retirement.

Although discussing money is taboo in many families, it’s wise to be transparent about your financial circumstances and create boundaries around financial requests. If this isn’t a viable option, be sure to include potential loans and gifts when planning for expenses in retirement.

Losing a Spouse

Morningstar estimates that 90% of women will manage assets on their own at some point during their lifetimes. Many women experience this for the first time in retirement due to the death of a spouse.

Losing a spouse can be emotionally devastating, no matter your stage of life. Yet failing to prepare financially for this possibility can make an already challenging situation even worse.

If you depend on your partner financially, there are steps you can take now to safeguard your financial independence if you unexpectedly lose them. For example:

  • Consider purchasing a life insurance policy to replace lost income or cover funeral costs and other outstanding expenses.
  • If your spouse has a pension, explore your survivorship options before retirement to ensure continued payments.
  • Understand Social Security survivors benefits, especially if your spouse has the higher earnings record.
  • Consult an estate-planning attorney to ensure your estate plan is current and organized for a seamless transition of assets.

With Proper Planning, Single Women Can Minimize Longevity Risk and Thrive Financially in Retirement

Planning for expected and unexpected expenses in retirement is crucial for maintaining financial stability and peace of mind. Yet minimizing longevity risk requires more than managing your expenses. Meeting your savings targets and investing for your long-term goals is also essential.

Remember, the earlier you start preparing financially for retirement, the better off you’ll be long-term. Moreover, you don’t have to go it alone. A fiduciary financial planner like Curtis Financial Planning can provide expert guidance and help you implement the right strategies to secure your financial future. To learn more, please explore our services and free financial planning resources.

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S5E1: Overspending? Here’s How to Get Your Spending Habit Under Control This Year

Financial Finesse Podcast / By /
Spending Habit

Take Control of Your Spending Habit Once and For All

In this episode, Cathy shares her tips and strategies for getting your spending habit under control once and for all this year.

Welcome to Episode 1 of the 5th season of the Financial Finesse podcast!

Today I’m going to talk about spending—specifically, how to get your spending under control. Many of my clients told me that one of their goals for 2023 is to get their spending on discretionary items under control. (In other words, the things you really don’t have to have.)

And they may not have a spending problem per se. But they know their spending is probably one of the things that’s keeping them from reaching their longer-term financial goals, and/or it’s just making them uncomfortable. They don’t feel right about their spending habits.

I have to admit, I can relate to this because I have a little bit of a clothing infatuation. I love anything new, and I love clothing and accessories. So, I’m going to be right there with you in working on getting my own spending habit under control this year.

Episode Highlights

  • [02:11] What do habits have to do with spending?
  • [03:23] Identifying your biggest spending weakness or weaknesses.
  • [06:05] What are your spending triggers?
  • [08:45] Setting your new budget for the year ahead.
  • [10:32] How to find ways to support yourself in reaching your goal.
  • [16:23] Determining your values and aligning your spending accordingly.
  • [17:33] Download our free e-book, How to Take Control of Your Spending This Year.

Links Relevant to this Episode

How to Take Control of Your Spending This Year Blog Series:

1: Reduce Your Spending By Creating Healthy Habits

2: Identifying Your Spending Weakness

3: What Triggers Your Overspending Habit?

4: Budgeting And Tracking Your Spending

How to Take Control of Your Spending This Year (Free e-book)

The Happiness Spreadsheet (Free e-book)

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Read the Full Transcript

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How to Take Control of Your Spending This Year, Part 4: Budgeting and Tracking Your Spending

Budgeting Help, Women and Money / By /
Budgeting and Tracking Your Spending

This article is part four of a four-part series to help you reduce your spending this year. In part three, you identified what triggers your overspending habit. This week, I’ll share tips and tricks for budgeting and tracking your spending.

Budgeting and tracking your spending can provide benefits beyond simply saving more money. It also allows you to invest more, pay off debt more quickly, and even retire earlier in some cases! Plus, it can offer a sense of control and accomplishment and reduce financial stress.

Setting a New Budget

Previously, you identified how much you spent in the last 12 months on your spending weakness. Now, it’s time to set a new budget for the next 12 months.

Of course, it’s helpful to choose your new spending goal within the context of a comprehensive cash flow and financial plan. However, to keep the task smaller and more doable, I suggest setting a budget of at least 25% less than you spent the previous year on your spending weakness.

For example, if you spent $10,000 last year, set a budget of $7,500 for the next 12 months. Reduce by a more significant percentage if you feel like your spending was way out of control last year!

Depending on your spending weakness, it may be helpful to set a monthly budget instead. For example, if clothing is your weakness and on average you spent $1000 a month last year, your new budget will be $750 a month. Setting a monthly spending limit rather than a yearly goal may help you stick your budget longer term.

Tracking Your Spending

Once you’ve decided on an amount, you need to create a system for tracking your spending.

You can accomplish this task either digitally or manually; the most important thing is that you do it on at least a monthly basis. If you wait until the end of the year, you lose the benefit of being able to modify your behavior if necessary.

One idea: Save all your receipts in a folder (online or physical). Then, at the end of each month, add them to a spreadsheet and subtract the total from your total budget. Another idea is to download an app like Mint or Goodbudget that tracks and categorizes your spending.

How to Stick to Your New Spending Plan

Budgeting and tracking your spending are indeed important steps. Yet it takes focus, patience, and perseverance to actually stick to your new spending plan.

In other words, changing your behavior is hard. To get your spending under control once and for all, you’ll need a set of tools and resources that support you in achieving your goal.

Here are a few ideas for changing your behavior and creating new, healthier habits:

  • Find a replacement activity for shopping. When you think about going to a store or hopping on the internet, read a book, call a friend, or watch a movie instead. Choose something pleasurable and stimulating that doesn’t cost money.
  • When you go to a store, be prepared. Make a list of what you want to buy and stick to it. This preparation will help you avoid impulse purchases.
  • Delay your purchase. Take a day or two to think about whether you need it.
  • Avoid peer pressure. Don’t shop with friends who encourage you to buy things you don’t want or need.
  • Don’t tempt yourself. Plan different routes when you are out and about to avoid your favorite stores and unsubscribe from email lists that entice you to spend money.
  • Find a new hobby that doesn’t involve spending a ton of money. For example, play a new sport, start a creative project, or learn to play a musical instrument or speak a new language.
  • Keep your goals front-of-mind. Add a sticky note to your laptop with your budget goal, or read books and articles or listen to podcasts or audio books about habits, conscious spending, and personal finance.
  • Practice self-awareness. When you are angry, tired, sad, or frustrated, go for a walk or meditate instead of shopping. Keep a journal about your experience and emotions while trying to change your behavior.
  • Repurpose your discretionary funds. Take some of your savings and donate to your favorite charity.
  • Hold yourself accountable. Tell your friends that you are trying to cut back on your spending and want their support, or hire a coach or financial advisor to help you reach your broader financial goals.
  • Visualize your future self. Think about what you’ll gain if you get your spending under control. Then, create a vision board depicting what you see and how you feel.

What Will Motivate You to Stop Overspending?

In addition to changing your behavior, you may need to adjust your mindset around spending altogether. Otherwise, it’s easy to slip back into bad habits.

One thing I’ve found helpful when trying to create a new habit is to identify my “why.” In other words, why is it so important to you to get your spending under control? What are you giving up by overspending? What’s the opportunity cost?

Some of you may want to retire early, but your current spending is keeping you from doing so. In effect, your spending habit may be keeping you from spending more time with your family, pursuing your lifelong dream of writing a novel, or just feeling more at ease on a daily basis.

Or maybe your why is to get out of credit card debt. Instead of putting hundreds or thousands of dollars each month towards your credit card balances, you could be contributing that amount to a retirement account, HSA, or donor-advised fund. You may also sleep better at night knowing you’re debt-free.

Take time to journal about what why you want to stop overspending and what it would feel like to get your spending under control. Then, ask yourself these questions: What would I do with the time and money I save? What could I accomplish instead? How would my attitude about myself change?

Budgeting and Tracking Your Spending for the Long Run

Lastly, people tend to be motivated by what they value. Ask yourself if your current spending aligns with your values. If not, this can be a powerful motivator when it comes to budgeting and tracking your spending.

If you aren’t sure what your values are or need some prompting, consider downloading The Happiness Spreadsheet. This free eBook is full of exercises to identify your values and align your spending with what matters most to you. It also has a list of other helpful resources to guide you in getting your spending under control.

If you’ve been following this blog series, I hope you now have a strong foundation to create healthier spending habits in 2023 and beyond. You may also find the other resources on my website helpful as you continue your personal finance journey.

Lastly, remember we’re in this together. Please feel free to connect with me, keep me posted on your progress, and ask questions.  

Good luck, and here’s to a prosperous 2023!

Download my FREE E-BOOK: How to Take Control of Your Spending This Year

Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.

If you found this information interesting, please share it with a friend!

How to Take Control of Your Spending This Year, Part 3: What Triggers Your Overspending Habit?

Budgeting Help, Women and Money / By /
What Triggers Your Overspending Habit?

This article is part three of a four-part series to help you reduce your spending this year. In part two, I took you through a simple exercise to help you identify your spending weakness. This week, we’re going to determine what triggers your overspending habit.

People overspend for many reasons, even when they know it’s detrimental to their finances. Unfortunately, overspending can become a habit. And habits only break if you want them to.

Breaking any pattern can be challenging, but you can change your behavior with persistence and a plan. Here’s your next step for getting your spending under control in 2023.  

Figuring Out Your Triggers

Oftentimes, something else triggers our habits, such as an external stimulus, an emotion, or even another habit. If you tend to overspend, chances are something is triggering this habit.

You may or may not be aware of what triggers your overspending habit. If you don’t, take some time to reflect on and journal about when your overspending habit started, what triggered it, and what continues to activate it.

From my experience working with women clients, here are a few common scenarios:

  • They have a good income or resources but have unrealistic expectations about how much they can spend. This situation frequently happens with women who experience a “sudden-money” event, such as a large inheritance, bonus, a big raise, a new highly paid job, or a liquidity event. Once the spending starts, it’s hard to stop.
  • They use shopping to deal with negative emotions such as loneliness or anxiety— or shopping as “retail therapy” to numb themselves instead of confronting what is bothering them.
  • They’ve stopped keeping track of their spending, don’t have a budget, and have yet to learn how much they can afford to spend while still reaching their other goals.
  • Shopping, which started as a pleasurable pastime, has slowly become more like an addiction. The excitement of buying something new and better (online or in a store), and the camaraderie with friends and shop owners, all combine into a positive reinforcement loop that can get out of control.
  • A life-changing event happened, such as divorce, the death of a spouse, a new home or relocation, and they haven’t adjusted their spending to their new reality.

Taking Control of Your Overspending Habit

Contemplating and writing down your reasons for overspending can be a helpful step in getting your spending back in alignment with your financial goals. Take your time and dig in as deeply as possible to determine what triggers your overspending habit before going on to the next step.

In part four of this series, we’re going to take action by setting up a budget and a system for tracking your spending. In the meantime, I invite you to check out these free resources to help you better understand and take control of your personal finances.

Download my FREE E-BOOK: How to Take Control of Your Spending This Year

Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.

If you found this information interesting, please share it with a friend!

How to Take Control of Your Spending This Year, Part 2: Identifying Your Spending Weakness

Budgeting Help, Women and Money / By /
Identifying Your Spending Weakness

This article is part two of a four-part series to help you reduce your spending this year. In part one, I shared a simple hack to help you create healthier spending habits. This week, I’ll take you through an exercise to help you identify your spending weakness.

It’s common wisdom that the way to complete a big task is to break it down into smaller parts and then tackle each task one at a time. Otherwise, overwhelm can set in, and nothing gets done. I’ll suggest a similar approach to tackling the “big task” of overspending.

What Is Discretionary Spending?

We all spend money on a lot of things, necessary and discretionary. For this exercise, we’ll define discretionary spending as spending on items you could survive without if you wanted to.

Examples may include an extensive collection of clothing, art, household knick-knacks, jewelry, shoes, accessories, make-up, books, or electronics. Alternatively, you may overspend on discretionary experiences such as excessive travel, entertainment, or dining out.

First, Identify Your Biggest Spending Weakness

Your first task in cutting discretionary spending is to identify your biggest spending weakness. For example, if you feel shame (or at least discomfort) about the amount of money you spend on something, it’s likely your spending weakness.

Most of you know your spending weakness, so choosing will not be difficult. However, for those who need more clarification, analyzing your past expenses can help you find your answer.

I encourage you to choose only one spending category at a time to keep things simple. (Breaking down a big task into smaller tasks helps get things done, remember?) That way, you are more likely to make progress. Of course, if you want to, you can add more categories or items and follow the next steps for each.

Next, Calculate How Much You Spent Over the Last 12 Months

After identifying your spending weakness, the next step is to write down how much you spent over the last 12 months on this item. While you can estimate this dollar amount, it’s better to look at your credit card and checking account statements to determine your actual spending. Otherwise, it’s easy to rationalize and make excuses when you’re guessing.

Got your number? Congratulations. I know that confronting money issues is hard, especially if it brings up uncomfortable feelings like regret, remorse, or shame. So let the feelings happen, but then let them go. Thank yourself instead for starting this journey to get back on track.

Continuing Your Journey

In the next article, we’ll go through an exercise to help you discover what triggers your overspending.

In the meantime, I invite you to check out these free resources to help you better understand and take control of your personal finances.

Download my FREE E-BOOK: How to Take Control of Your Spending This Year

Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.

If you found this information interesting, please share it with a friend!

How to Take Control of Your Spending This Year, Part 1: Reduce Your Spending by Creating Healthy Habits

Budgeting Help, Women and Money / By /
Reduce Your Spending by Creating Healthy Habits

This article is the first in a four-part series to help you reduce your spending this year. I’ll be sharing the knowledge and experience I’ve gained over the last 20 years creating financial plans and guiding women to take control of their finances to help you develop healthier spending habits.

I know many people scoff at the idea of New Year’s resolutions. But I don’t. I believe it’s an opportunity to try and jump-start new habits.

Yes, you can start a new behavior in March or September, but something about a new year motivates me—and maybe you, too. Plus, it helps if the habit you’re trying to change causes you distress, so you’re motivated to work on it throughout the year.

For example, many people want to reduce their discretionary spending. They intuitively know that their spending is getting in the way of achieving their financial goals, but they don’t know what to do about it.

In part one of this series, I’m sharing the simple mindset shift that can help you reduce your spending once and for all.

January is an excellent month to begin a new spending plan.

You may have noticed that I’ve been using the word “habit” a lot. But what do habits have to do with spending?

Many of our behaviors become habits. Overspending or unconsciously spending is a habit, which is actually good news if you’re trying to reduce your spending.  

Many experts—for example, James Clear, who wrote the book Atomic Habits—have shared their wisdom and strategies for breaking bad habits and replacing them with new ones.  We’ll be leveraging the wealth of information available on this topic, as well as my own experience as a financial planner, to help you get control of your spending in 2023.

What does it take to develop new habits?

If you want to change your habits and reduce your spending this year, living in denial isn’t the answer. Your brain won’t like that. It will fight back too hard.

Instead, you’ll need to make thoughtful decisions about where to allocate your resources moving forward. Eventually, cutting back on spending will be something you want to do because you know it will get you to a better place.

Ready to reduce your spending? Let’s get started.

Each blog post in this series will focus on getting you to think and then take action. You will be writing, so get a pen and paper out, or boot up your laptop. By week four, you’ll have a new attitude and plan in place to help you reduce your spending and get back on track towards your financial goals.

Are you ready to get started? Great. In the next article, we’ll work on identifying your spending weaknesses.

In the meantime, I invite you to check out these free resources to help you better understand and take control of your personal finances.

Download my FREE E-BOOK: How to Take Control of Your Spending This Year

Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.

If you found this information interesting, please share it with a friend!

How to Stay Within Your Budget: Monitor Your Budget Busters

Budgeting Help / By /
Monitor Your Budget Busters

We originally published How to Stay Within Your Budget: Monitor Your Budget Busters on February 20, 2017, and have refreshed it for 2021.

It’s not that difficult to create a budget. What’s hard is sticking with it over time. One way to increase your success is to track what you spend. Unfortunately, very few people have the discipline to track every expense. The good news is that you don’t have to do this to be successful.

Most people don’t overspend on everything. Instead, there are usually a few items—let’s say clothing, dining out, or travel—that bust the budget. Monitoring and controlling these budget busters can help you reduce your spending without tedious bookkeeping.

How to Monitor Your Budget Busters

To stay within your budget, monitor your budget busters. You know what they are. Perhaps you go to your favorite clothing boutique and can’t say no to the latest seasonal fashions. Or you find it impossible to browse a bookstore or Amazon without stocking up on the latest bestsellers.

Indeed, it doesn’t help that online shopping has made it all too easy to spend more money without any effort at all. And the pandemic only exacerbated this trend. In fact, consumers spent $791.70 billion online with U.S. retailers in 2020, up 32.4% from 2019, according to Digital Commerce 360.

Though online spending is up in general, the things we overspend on are as individual as we are. Identifying the culprits is the first step to creating a spending plan that will work for you.

A Simple Process to Stay Within Your Budget

  1. Make a list of your budget busters – you know what they are.
  2. Tackle one at a time, or if you are extra motivated and organized, all at once.
  3. Track your spending by employing the techniques below.

The envelope system involves placing your monthly budgeted amount for each item into an envelope in cash. For example, label the envelopes “clothing cash,” “shoe cash,” and “dinner-out cash,” and stash them in your wallet. When the cash runs out, stop spending until the next month when you will refresh the cash.

You may be thinking, “There’s no way I’m going to carry that much cash around.” And of course, there are those airline miles to accrue! In that case, write down your budget busters in your day planner or on a piece of paper that you post somewhere visible. After each purchase, subtract what you spent from your budget. Stop buying when you reach your limit.

If you gave up your day planner years ago and lose every piece of paper you write on, try booting up your favorite tracking software. For example, PocketGuard and Mint.com let you upload transactions from your credit cards and checking accounts to keep track of your spending. Each month, log in to see if you were able to successfully stay within your budget.

Learning to Spend More Intentionally

Alternatively, you can find a trusted advisor or friend to “buddy up” with and help you stay on track. Accountability is a powerful motivator.

Finally, try monitoring your budget busters instead of every expense for a few months and see how it works for you. I think you’ll find that it’s an excellent behavior modification tool. Moreover, you’ll become increasingly aware of spending habits that aren’t in your best interest. Over time, you’re likely to find it much easier to stay disciplined and reach your financial goals.

Do you want to manage your money (and life!) better?

Download The Happiness Spreadsheet and learn how to align your spending with your values for greater happiness.

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Life After Lockdown: Creating a Budget Post-Pandemic

Budgeting Help, Women and Money / By /
Creating a Budget Post-Pandemic

For the past few weeks, I’ve been teaching a personal finance class at Mills College. The first class covered cash flow and budgeting, so I asked my students to create a budget for homework. To help them get started, I suggested reviewing their recent credit card and bank statements to estimate their discretionary spending habits. One of the students brought up a great point: “I wasn’t spending like I normally do during COVID, so the last 14 months may not be representative of my spending from now on.”

As it turns out, her statement is true for most of us. For example, 64% of Americans say their spending habits have changed since the pandemic started, according to a Bank of America survey of more than 2,500 adults. In addition, a separate Bank of America survey found that 46% of affluent Americans have been getting their financial lives in order during the last year and expect to reach key financial milestones sooner than their parents did. That means many of us not only changed how we spend our money, but we also developed more financial discipline during the pandemic.

Indeed, our spending will likely look different as the world reopens and life returns to normal. Of course, just how different depends on the person. It’s tempting to splurge on the things and experiences we missed most in lockdown (for instance, we finally have a reason to buy new clothes again!). However, I think it would be fantastic if some of us could maintain the money habits we developed when we had fewer options. Creating a budget that reflects those habits can be a great way to do that.

How the Pandemic Changed Our Spending Habits

Life in lockdown forced us to reevaluate many aspects of our daily lives. As our circumstances and priorities changed, so did our spending. Gyms and restaurants closed, and travel was all but nonexistent for the first part of the pandemic. So, where did our money go?

Self Magazine surveyed 1,300 Americans to find out how their spending habits changed during the pandemic. Of the female respondents, 62% said they used time in lockdown to cook more creatively and spent a lot more money on groceries as a result. In addition to our growing grocery budgets while at home, a CIT Bank survey conducted by The Harris Poll found that spending on food delivery was also up 25% during the pandemic. 

However, food wasn’t the only thing we spent more on in lockdown. According to data provided by budgeting app Mint last August, consumer spending on investments, pets, education, and home expenses was up significantly year over year.

While some of these trends may continue, others will naturally return to more normal levels in a post-pandemic world. It may be helpful to keep this in mind and adjust accordingly when creating a budget for the future.

Good Habits We Developed in Lockdown

Despite increased spending in certain categories during the pandemic, more than half of Americans said they spent less and saved more than usual overall, according to the same CIT Bank survey. Thanks to government stimulus and new spending habits, many people were able to save more and pay down debt.

Notably, CRS reported that credit card balances declined about $76 billion in the second quarter of 2020, the largest quarterly decline on record. In addition, data from Experian shows that on average, Americans’ credit scores increased and payment habits improved in 2020.

Yet good habits extended beyond those experiencing financial difficulties before the pandemic. Of more than 2,000 affluent adults (households with investable assets between $100,000 and $1 million) surveyed by Bank of America, 81% said they took the money they’d normally spend on entertainment, travel, and dining and set it aside for savings and emergency funds during the pandemic.

The Pandemic’s Impact on Women

These statistics certainly paint a rosy picture, and many of us have been fortunate enough to come out of the pandemic in similar or better financial shape than we started. Unfortunately, however, many women experienced unprecedented challenges during the pandemic, setting them back even further on their path to retirement.

For example, the U.S. Bureau of Labor Statistics reported women’s unemployment has increased by 2.9% more than unemployment among men since the start of the pandemic. In addition, data from Washington University in St. Louis showed hours worked by mothers fell four to five times as much as hours worked by fathers. Many women had no choice but to leave the workforce to care for aging parents or children. Female participation in the workforce has not been this low since 1988, according to one NPR analysis.

It’s no secret that women have long been at a disadvantage when preparing for retirement. This is because we tend to invest less and hold more cash than men, contributing to our savings shortfall. However, the main driver behind this shortfall is our lower lifetime earnings due to gender pay gaps and caretaking responsibilities—a trend that only worsened amid the pandemic.

Morningstar reports that 55% of all jobs lost in 2020 (2.3 million jobs total) were lost by women. And 32% of women ages 25-44 say they’re not currently working due to childcare demands, compared to 12% of men in the same age group.

If you’re facing any of these challenges yourself, creating a budget for post-pandemic life might be the last thing on your mind. However, closing the retirement savings gap is more critical than ever. Even one small step in the right direction can help you take control of your financial future.

Creating a Budget for Your Future

My suggestion to the student who spoke up in my class was to look back to 2019 as a spending guide. You may find this advice helpful as you’re creating a budget for yourself post-pandemic. However, if you want to continue the good habits you developed during COVID or create new habits to better prepare yourself for the future, be sure to incorporate these changes into your new spending plan. Remember: small, consistent actions over time often lead to big results.

If you’d like to work with a fiduciary financial planner to help you feel better about your money and prepare for the future, please schedule a call to see if we’re a good fit. In addition, you can check out The Happiness Spreadsheet, a fresh, inspiring approach to budgeting that can help you maintain good money habits and develop new ones.

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5 Ways to Boost Your Financial Confidence

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Boost Your Financial Confidence

In many aspects of life, confidence is key. But if there’s one category where that emotion is often lacking, it’s financial. Fortunately, April is National Financial Literacy Month. To celebrate, this month’s podcast episode features Jennifer Barrett, author of Think Like a Breadwinner. In addition, I’m sharing some tips of my own for how you can boost your financial confidence to shift your money mindset.

Five steps you can take right now to boost your financial confidence:

1. Face Your Finances

Regularly revisiting your budget, checking in on your accounts, and tracking your net worth are three tasks that any financial advisor would recommend. And for good reason. These tasks may seem simplistic, but they provide you with a solid financial foundation. Moreover, getting a routine down for the basics will also help boost your financial confidence when it comes to tackling larger tasks.

2. Educate Yourself

There is an incredible number of ways to improve your financial literacy. And with the rise of personal finance blogs, podcasts, books, and courses, it’s easier than ever to get your hands on the information you need.

For instance, Curtis Financial Planning’s website contains the Of Independent Means blog and the Financial Finesse podcast, as well as several free downloads and other resources. In addition, the Balance has compiled a handy list of the 10 best personal finance books of 2021.

3. Know Your Worth

Have you gone a year or more without a cost-of-living raise? Or have you recently changed positions, taken on more responsibilities, or spent time honing your skills? If so, it’s time to negotiate a higher salary. Indeed, growing the gap between your expenses and your income will boost your financial confidence. However, it can also help you meet many common financial goals.

Just be sure to do your research to find out how much others in your position are making. For example, websites like Glassdoor will give you the average salary for your position and location. In addition, you can add in your years of experience to get a more specific answer.

4. Set Financial Goals

Two common financial goals are putting together a budget or spending plan and paying down debt. These two tasks go hand-in-hand, and they’re vital for a healthy financial future. Other examples of financial goals include:

• Starting an emergency fund
• Saving for retirement
• Paying off your mortgage
• Funding a dream vacation

Setting financial goals offers a daily reminder of what matters more than emotional spending or convenience purchases. No matter your financial goals, facing your finances, increasing your knowledge, and knowing what you’re worth can help you get there.

5. Partner With a Financial Advisor

Nothing offers a bigger, better, or faster financial confidence boost than partnering with a knowledgeable financial advisor. To get started and cross one thing off your financial to-do list, download The Happiness Spreadsheet. This incredible free resource offers a unique approach to budgeting by aligning your spending plan with your values.

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Simple Truth #3: Contrary to Popular Opinion, You Were NOT Born to Shop

Budgeting Help, Simple Truths About Money / By /
You Were Not Born to Shop

We originally published this article on February 20, 2010, and it remains one of our most popular blog posts to date. In the spirit of ongoing financial wellness, we thought we’d give it a refresh for 2021 as many of us adjust to new habits—including how we shop.

I’m a financial advisor. But I’m also a normal person just like you. I know how difficult it is to be an American and somehow not feel it’s our duty to shop.

Our economic and social systems are based on capitalism. Consequently, economists watch consumer spending like hawks, and no wonder—it fuels about two-thirds of total economic output in the United States. Talk about pressure!

This also puts a lot of pressure on you, the consumer. If no one buys our goods and services, then what happens to our economy?

Advertising Only Fuels Your Shopping Habit

The advertising industry is the perfect agent for promoting consumption. According to the ANA, advertising is linked to the bedrock principles that shaped our nation—free speech, competition, and individual choice—and is a driving force in fueling economic activity.

As such, advertisers have one role: to make us want us to consume. Their mission is to make products and services seem as enticing as possible, so we buy them whether we need them or not. Just watch a few episodes of Mad Men to learn the tricks of the trade.

And it’s almost impossible to escape from the influence of advertising unless you live like a hermit. Watch TV, drive down the freeway, listen to the radio, log on to a website, and you’re bombarded with advertising messages. No wonder we feel like we were born to shop!

Only You Are in Control of Your Shopping Habit

The problem is, economists and advertisers aren’t concerned about your personal bottom line. Just like you, they’re concerned about their jobs, their families, their standard of living, and their ability to retire comfortably.

Therefore, you need to adopt a “me vs. them” mentality when it comes to kicking your shopping habit. In other words, before you open your wallet to buy something, stop and think: Do I want “them” to have my money, or do I want “me” to have my money? The person on the other side of the cash register certainly doesn’t know if you can afford the item you are about to purchase—nor do they care.

Think of shopping as a psychological battleground—that’s how advertisers think of it.  Do you want to be the victor or the vanquished? Remember: you were not born to shop!

Don’t Be the Vanquished When It Comes to Your Personal Finances

Feeling vanquished about your personal finances isn’t a good thing.  It probably means you’re in debt, or you’re anxious about your future and feel stuck. Is all the “stuff” worth it? Probably not.

Excess stuff also clutters your environment. Coupled with your excess debt, this can ruin your credit score and your relationships.

Like anything psychological or emotional, it isn’t easy to change. But there are things you can do to take control of your spending. It’s time to denounce popular opinion, admit you were not born to shop, stop spending more than you earn, and live within your means.

First, Balance Your Budget

Using an excel spreadsheet, list all of your expenses categorized as follows:

  • Fixed and necessary expenses. These expenses are the same every month and/or are necessary to keep you housed, clothed, groomed, healthy, fed, and mobile.
  • Other committed expenses. These may include child-related expenses, pet care, fees to professionals, adult education, gym membership, insurance premiums, and debt payments.
  • Discretionary expenses. Includes vacations, dining out, entertainment, hobbies, electronics, gifts, home improvements, furnishings.
  • Auto-savings. Includes your retirement contributions and other savings.

Next, total the subtotals for each category to come up with your total monthly expenses. Then subtract this amount from your total monthly income. The outcome will either be a positive or a negative number.

If it’s a positive number, congratulations. You are living within your means. If you know you’re saving enough for retirement and other financial goals and have no debt to pay off, then you have some discretion as to how you use your money. However, if the outcome is negative, go back and rework your expenses until it comes out even or positive. Once your cash flow is neutral or positive, you now have a working budget.

Hint: You will have the most flexibility to adjust your discretionary spending, but you can also try and negotiate savings with service providers or increase deductibles on insurance policies to save on premiums. In addition, you should try to eliminate any high-interest credit card debt before adding to your discretionary spending account.  

Some Tips for Staying the Course

  1. Print out a copy of your budget. Post it somewhere that is visible to you regularly, so it stays top-of-mind.
  2. Track your spending. Mint.com is a free online tool that tracks all of your expenses, income, and savings. You can enter your budget, and Mint will send you an email any time you overspend on a budget item.
  3. Try the envelope system. Place your budgeted amount for discretionary items like clothing and food in an envelope in cash. When the cash is gone, you can’t spend on those items again until the next month.
  4. Leave your credit cards at home. Become more conscious that the money you spend is from a finite source. Try paying cash or using your ATM card whenever possible.
  5. Walk away. If you’re tempted to buy an item that you don’t really need, leave the store, walk around the block, and think about it. Nine times out of ten you won’t buy the item. Remember: It’s “me vs. them.” Who gets your money?
  6. Reward Yourself. Each month that you stay within budget, reward yourself in some small but significant way. For example, indulge in a nice lunch out, get a pedicure, or order a nice glass of wine with a meal.

Maybe You Were Not Born to Shop, But You Still Want To

After completing the budgeting exercise, you may find it’s impossible to balance your cash flow. Even though you realize you were not born to shop, you don’t want to live frugally, either. If this is the case for you, look at the income side instead. Can you ask for a raise at work? Find a higher-paying job?  Freelance?  Start a small business? Rent a room out? Sell belongings to raise cash?

Explore all avenues. Exercise your capitalist gene by thinking about all the ways you can produce goods and services for profit—for yourself!

Feel Happier While Spending Less

If you want to think differently about the relationship between your spending, your values, and your happiness, download The Happiness Spreadsheet. In addition to giving you a more inspiring approach to budgeting, our free eBook includes a number of resources you can use to get your shopping habit and spending under control.

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