Three Spending Habits That Could Affect Your Retirement
Motley Fool recently identified three spending mistakes that are common in retirement.
Many retirees have a trend for falling into financial traps that could reduce their retirement income significantly, according to Motley Fool. These traps include buying things just because they’re on sale, not paying attention to the little things, and spending extra money just because they have it. Find out more below.
1. Buying things just because they're on sale
S-A-L-E! Who doesn’t love that word? The psychology of the sale makes it easy to get caught up in it. According to Psychology Today, sales shift our focus toward what we’re saving rather than what we’re spending.
If the item is something you really need and will use, of course it’s logical to take advantage of the discount. But if you’re purchasing it with the hope of using it later, then you’re spending extra money that could add up quickly.
According to a survey by Slickdeals, the average American spends around $450 per month on impulse purchases. That's around $5,400 per year, or $324,000 over the average lifetime (and assuming you become financially independent at age 18). Nearly 2/3 of those who shop impulsively said they do so because they got a good deal on the item, and 40% said they have purchased something on impulse simply because they had a coupon.
According to Motley Fool, if you put that $5,400 per year you may be spending on impulse purchases toward your savings, that money could dramatically affect your retirement. For example, if you save $5,400 per year in a retirement account earning a 7% annual rate of return, then in about 30 years, you'd have saved around $510,000.
2. Not paying attention to the little things
You may justify spending money each month on "little" costs, thinking that $10 here and there won't hurt. But these costs can quickly add up, and before you know it, you're spending hundreds of dollars per month on "little" things.
If you could save an additional $100 per month by cutting out the little things that you don’t really need, then that money could go further than you may think when you invest it in your retirement fund. By saving just $100 per month earning a 7% annual return on your investments, you’d have accumulated around $113,000 in savings over 30 years.
3. Spending extra money just because you have it
It’s tempting to want to treat yourself to a special vacation or the newest technology gear when you get extra money from a tax return or a bonus at work. There may be no harm in occasionally splurging, but be mindful that you’re possibly doing so at the risk of your retirement.
It’s not easy to save for a comfortable retirement regardless of how much money you earn. The more you make, the more you spend, according to Nielson Insights—so making a lot of money doesn’t always equal a secure retirement. But if you're consciously wasting money on things you don't need, these bad habits could end up costing you thousands of dollars and an uncertain financial future. You can read the completeMotley Fool article here.
There are numerous posts on this blog, and millions on other blogs and news sites, on the subject of what the rich do different, but it's worth repeating again, I guess. The principles are simple. Still, some two-thirds of Americans live paycheck to paycheck. For many, the act of using all of your monthly income to cover your monthly expenses — with no money left over and none for savings — is a fact of life. Look, I've been there. It can be a mindset, and a trap. Best to get out of it if you're in it, as fast as possible. Depending on the survey, the percentage of people living paycheck to paycheck runs from half of workers making under $50,000 (according to Nielsen data ) to 74% of all employees (per recent reports from both the American Payroll Association and the National Endowment for Financial Education.) And almost three in 10 adults have no emergency savings at all, according to Bankrate’s latest Financial Security Index . Even many in the upper class are seeing t
Climate change activists are not just interested in reducing carbon emissions in order to "save the planet." Their underlying desire is to overturn capitalism and replace it with socialist governments worldwide. Our story starts with the IPCC, or the Intergovernmental Panel on Climate Change, a U.N. organization. "And any settlement of the Global Warming issue by the UN would entail massive transfers of wealth from the citizens of wealthy countries to the politicians and bureaucrats of the poorer countries." (1) In 1992, at the first U.N. Earth Climate Summit in Rio de Janeiro, Brazil, Program Executive Director Maurice Strong stated, very candidly: " We may get to the point where the only way of saving the world will be for industrialized civilization to collapse. Isn’t it our responsibility to bring this about?" (2) Former U.S. Senator Timothy Wirth (D-CO), then representing the Clinton Administration as U.S. undersecretary of state for global
High-yield bonds are sending the stock market a warning sign. This is not a prediction, but a leading indicator. Just because it's happened in the past, doesn't mean it will happen in the future. Yes, the S&P 500 made a new all-time highs on Wednesday and Friday. Yes, the Fed’s easy money policy is helping to boost stock prices. Yes, President Trump wants a higher stock market. And yes, we are entering a seasonally bullish period for stocks. And, if high-yield bonds were making new highs along with stocks this week, then I’d have to wipe the bearish egg off my face and concede that the stock market isn’t in as much trouble as I thought. The action in high-yield bonds tends to precede the action in the stock market by anywhere from two days to two weeks. So, it’s notable that while the S&P was posting a new all-time high on Wednesday, junk bonds were falling (see down arrow on chart below). And, by the look of the following chart of the iShares iBoxx High Yield C