Australian Baby Boomers have a major problem on their hands, they are quickly approaching retirement and do not have a handbrake on their spending.
The statistics still tell us that 1 in 3 of Australians are still spending more than they earn. More Australians are holding large amounts home loan debt later into their working lives. Credit card debt is still at an average for $4,200 per person. If you are within a few years of retirement it’s making it harder to get a clear picture of how much money you will really need to retire on.
Many pre-retirees have a target number for income they will need per week to spend in retirement year on year, the question we need to answer is how many of these people can hold themselves to this number? More to the point, is this number an accurate reflection of what they are spending in their years leading up to retirement?
Endless articles sighting various research show us the majority of people don’t have a handle on the standard expenditure in their lives, it’s not a high priority and as a result don’t get bogged down in the detail as their focus tends to be on managing the large expenses in their lives.
It has become clear from clients we work with that there is a disconnect between people’s ‘tap and go’ spending habits and how they reconcile their total spending taking into account the large items they generally save for.
We can see it’s the expenditure people don’t see that is hurting people the most.
The $7 coffee and toast, the $12 breakfast and $15 lunch purchases we ‘tap and go’ all add up and catch us unaware. We don’t look for them when we try to understand why we exceed our budgets as they not appear obvious to us and are certainly not ‘out of the ordinary’ spending. The issue for many people is the frequency we ‘tap and go’ with these items, that is the real problem.
This is where a robust expenditure reconciliation program is strongly advised, for people approaching retirement this type of program needs to be a greater focus, spending behaviors are easier to curb when you still have the ability to save for your retirement rather then in retirement where a spending oversight may take years off your long term nest egg.
There are many great programs out there you can now use, it has never been easier to keep track and therefore realistic via the use of technology. Our strong advice is try a few and find one that works for you and track your spending leading into retirement before it’s too late.
Follow the trends in your spending and identify your weaknesses so you have a plan on how to curb your enthusiasm for the frequency of these smaller transactions.
People who do focus on reconciling their expenditure in the past have used all sorts of methods from a trusty spreadsheet or general paper based ledger that relies heavily on manual intervention, downloads from the bank and inputting statements themselves. Whatever has been used before it is now time to start letting technology work for you and use these new automated programs to deliver you the reporting you need to make an accurate and clear plan for your future.
With retirees trying to achieve more from their retirement savings due to an expected prolonged period of low investment returns, every little bit of extra savings you can control will help you significantly in the long-term
The final years leading to retirement are so important, it is paramount to have a handle on your spending and not arrive without a handbrake so you are in control and retire financially secure.
If you need help in getting a handle on your spending please don’t hesitate to contact to learn how Your Wealth Hub can help you.