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Cash Flow Matters: How Spending Habits Influence Retirement Prospects for Baby Boomers

Cash Flow Matters: How Spending Habits Influence Retirement Prospects for Baby Boomers

People are living longer.  That means people are now spending more time in their retirement years than previous generations. This necessitates a careful evaluation of spending habits to make the money last, and nowhere is this more critical than among the Baby Boomer’s. At SC Financial Services, we believe that having a robust retirement strategy starts by grasping why cash flow, particularly spending habits, have such a heavy impact your retirement plan.

Understanding Cash Flow

Cash flow is the total amount of money being transferred into and out of a business, causing a lucrative surplus or a parching drought.  The principle is the same when applied to personal finances. For current and upcoming retirees, staying financially solvent after stopping full-time employment hugely depends on their cash flow dynamics. Our clients who are about to retire, want to know how they are going to replace their “paycheck”.  They have saved, planned and now it is time to spend and enjoy retirement.  Yet, if you do not have a strong grasp on what it costs to live, the prospect of spending savings and investments is frightening.  Will you have enough?  Or will you live outlive your resources?

The Impact of Spending Habits

One of the most significant influences on your cash flow is your spending habits. The intrinsic link between spending patterns and the duration or quality of your retirement cannot be overstated. Irrespective of how robust your income sources are or how substantial your retirement savings are, habits of excessive spending or unplanned shopping sprees can dent your retirement budget significantly. Even if you are a multi-millionaire, if you overspend, you can still run out of money.

In our experience, spending habits are the primary driver of success or failure of a financial plan. Coupled with inflation and lifestyle changes where there may be more travel, higher medical expenses and long-term care, a close look at spending is critical to understanding what you will need for income in retirement.

Effect on Retirement Prospects

If your expenses exceed your income during retirement, it will lead to a dwindling of your retirement savings at a much faster rate than anticipated. As we are aware, the average retirement age is 65, but with modern healthcare, many live up to 90 years or more. Therefore, if your spending habits don’t change or cash flow isn’t managed properly, the risk of outliving your savings becomes frighteningly high.

Developing Smart Spending Habits

At SC Financial Services, our clients’ retirement independence is our top priority. We advocate for the adoption of smart spending habits such as:

1. Reducing Impulse Buying: Advertisements and sales promo can lure you into unplanned and unnecessary shopping. They call it “click bait” for a reason, fishing for you to click on the ad and impulsively buy things you may not need.

2. Delaying Big Purchases: Pause before buying and consider if you really need that item. A delay could help you avoid a hasty purchasing decision. Our family uses the 24-hour rule.  Wait 24 hours before making a large purchase so you have time to consider the necessity vs. the desire for the item.  Please note, we are not suggesting you wait 24 hours for a new air conditioner if it is 110 and yours is broken! But there are other situations where waiting for a period of time may help you gain perspective on the cost versus the benefit of the big-ticket item.

3. Monitoring Monthly Expenses: Keeping an eye on your monthly bills can reveal potential areas to save. At SC Financial Services, we have reviewed hundreds of personal spending budgets (aka “Spending Plans”) for our clients.  It is always surprising to us how little things add up so quickly.  For example, subscription and streaming services, online shopping and big box stores are usually the culprits in an over-spending situation.  By keeping an eye on your discretionary expenses and you will have better control over your wallet and ultimately more money for your retirement goals.

4. Automating Savings: While still working, automatic savings plans can help ensure that you are consistently contributing towards your retirement plan. Whether through a 401k, Roth IRA or some other vehicle, finding ways to pay yourself first increases the resources you will have available to support your retirement goals.

As a Baby Boomer, your options for improving your retirement picture aren’t limited to bringing in more income. A detailed cash flow analysis, incorporating tweaks to your spending habits, can dramatically improve your retirement prospects – giving you the confidence that comes with financial independence.

At SC Financial Services, our team of experienced wealth management professionals is dedicated to helping you optimize your cash flow and enhance your retirement strategy. Facing retirement doesn’t have to be daunting. With careful planning and discipline, you can enjoy the freedom of a financially stable retirement. Take the first step and reach out to us at info@scfinancialservices.com or (480) 214-9596, so we can help you with your spending plan!

DISCLAIMER:  SC Financial Services, Inc. is a dba of Avior Wealth Management, a SEC registered investment advisor.  Investment management and financial planning is offered through Avior.  All investments are subject to risk including loss of principal invested.  Past performance is not indictive of future performance.  Please consult with you attorney or tax professional regarding all legal or tax matters, respectively.



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