BACK OF THE ENVELOPE

IF I COULD GET MY PRE-RETIREE CLIENTS TO DO ONE THING, it would be to put together a solid, tight budget of what they will spend during retirement.

I HAVE FOUND THAT FAR TOO MANY PEOPLE SPEND TOO MUCH TIME FOCUSING ON THEIR INVESTMENTS.  Of course we should all do this, but not at the expense of overlooking how much we will spend.  Our expenses are directly tied into how much we need.

IN THE MIDST OF WORKING WITH A NEW CLIENT, HE SENT ME AN EMAIL THIS PAST WEEKEND.  The subject line was Back of the Envelope.  

THERE IT WAS!  The final piece of the puzzle in his plan.  He had worked up a quick budget.  It was itemized and, from what I can tell, accounted for his expenses.  It was concise and neatly organized and on one small piece of paper.  I would guess it probably took 30 to 40 minutes to compile, if that.

PRIOR TO RECEIVING THIS, MY PROJECTION WITH HIM HAD REVEALED THAT HE WAS IN GOOD SHAPE.  But I did that before he put together this budget.  He had provided only an estimate of what he would spend. 

HOWEVER NOW THAT I COULD SEE HIS BUDGET, I FELT EVEN MORE CONFIDENT ABOUT HIS SITUATION.  He is likely going to retire in a few months and this helps me more clearly understand how his situation will unfold.  And he is even in a better spot than I initially suspected.  

THINKING OF RETIREMENT OR FINANCIAL INDEPENDENCE?  Save what you can and diversify and keep your costs low.  These are critical and important.  But understanding your expenses – your real expenses – matters at least as much if not more.  

P.S. DON’T WORRY ABOUT OTHER PEOPLE OR INDUSTRY AVERAGES.  Focus on your situation.  You ‘re living your life, not someone else’s.