The last time we met was disappointing for Ramona who had hoped to retire soon, so I hoped that we could do some strategic planning this time around to give her more hope that she could make a significant change in her life. It seemed to me that there was more than one option for her. Alex suggested that he would support her making a change as long as it didn’t jeapardize their future or mean that he would have to work forever to make up for her early retirement.
We started our meeting with a little brainstorming to gather ideas for other options for Ramona. We came up with the following: she could work fewer hours at her current job which might require that she work more years, she could find another full time job in her current occupation, she could decrease her current work time while building her consulting business, or she could change occupations entirely, either through some education program or simply starting a field that does not require a lot of education.
“I think I’m too old to start a whole new career,” Ramona said, rejecting that drastic of a change. “But working fewer hours and doing more consulting appeals to me if I could build up that business. “How much do I need to earn?, do you think?”
“From the retirement projection we made, I can see that you need to earn enough to cover your expenses and to save $15,000 annually. So in order to answer that question we need to see how low you can reduce your expenses.” I replied.
Alex had brought actual expense reports from quicken.com that they had started to use to track their expenses. Finding places to cut expenses is difficult for all clients, and this couple expressed the same struggle.
“We are not big spenders,” Alex commented, adding that they don’t go out very much or buy a lot of expensive items. I agreed that it didn’t look like they were extravagant, but if they could cut back their spending and save more each year, they could increase their saving by every dollar cut out of their budget.
By the end of the meeting we had come up with some ways to save more monthly by budgeting in the following ways:
1. They’re going to reduce their travel to one major trip every two years instead of every year, resulting in saving around $5,000 in the non-travel years.
2. They’re going to cut their spending on food, reducing their take-home purchases to once a week, and eating out to twice a month. They expect to save $200 per month, $2,400 annually.
3. They’re going to reduce their gym expenses by switching to a cheaper gym. Annual savings of $1,200.
4. They’re going to reduce their pet expenses by doing the grooming themselves, savings of $500 annually.
Some changes in their spending will reduce their spending greatly, others not as much. But getting in the frame of mind of savings and as a couple being willing to change their life style a little bit to make a future that they both want, will enable them to boost their annual savings significantly. In this way, Alex can work with Ramona to achieve a well-earned retirement.
