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On a Fixed Income? Smart Strategies to Save Money

Planning Matters Radio / Peter Richon
The Truth Network Radio
June 8, 2024 9:00 am

On a Fixed Income? Smart Strategies to Save Money

Planning Matters Radio / Peter Richon

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June 8, 2024 9:00 am

If you're on a fixed income, it's vitally important to stretch every dollar. But that's becoming increasingly difficult considering huge increases in necessary expenses. In this video, Peter Richon with Richon Planning and Erin Kennedy break down a few savvy strategies to save money on these expenses:

-Property Taxes

-Home and Car Insurance


 In retirement, it's crucial to strike a balance between preserving capital and generating sufficient returns to combat inflation. This is where working with a financial advisor can really help. If you'd like to speak with Peter, please call (919) 300 - 5886 or visit

#WealthManagement #Retirement #FixedIncome #SaveMoney


Peter, very good to see you.

Welcome back everyone. Today's video is for anyone who is on a fixed income. We are talking through some smart strategies to save money. Of course, the cost of living has rapidly increased in the past few years. For most people, our income has barely kept pace, which becomes increasingly stressful for people who are living on a fixed income. This is kind of a saying that I equate with the previous generations that had the luxury of pensions as part of their retirement, right? Yes, we still have Social Security and that part of things is on a fixed income.

But today's version of mom or dad or grandma or grandpa are on a fixed income is that mom or dad or grandma or grandpa is worried about running out of money because today's generation has the 401k, has the lump sum. We've got a finite amount of money. We've got an unknown amount of time to try to make that money last. And so we really need to focus in on budgeting and in the plan ahead of time as much as possible account for inflation. You know, fixed income during our working career is a little bit different as well because, yes, there has been some wage stagnation where our wages have not kept up with the cost of living. But that is exponentially more difficult once you retire and you get to the income producing years where your assets, your investments are responsible for not only covering today's line item budget, but also into the future accounting for today's expenses.

Plus inflation. And I do encourage all clients as we are trying to target the right kind of income for retirement to do a couple of different versions of the budgeting process. One is the line item budget where we list all of the essentials. Basically, you know, this is subsistence covering covering these expenses, but also the look back budget, which we look back over the last six to 12 months worth of bank statements and right on the front cover. There's beginning balance credits, debits and ending balance.

Debits is what you spend. That's how much life actually costs you. And a lot of times there's a pretty dramatic difference between the lifestyle expenses, the look back budget and the line item budget, which is just the essentials. That biggest one is lifestyle.

Right. And that's often where a lot of expenses are hell or are hidden, but also the one that we may have the most control over if we really get serious about trimming back. And it's certainly going to be the first thing that is cut if we do ever experience that fear of running out of money or living on the fixed income. When we talk through those necessary expenses, though, of course, Peter, property taxes are at the top of the list. Are there any strategies to save money on property taxes?

Yeah. Don't forget about property taxes and insurance, even when you've got the paid off house. Those things are going to still be part of the retirement budget equation. And yes, I mean, they're within reason. I guess there are some strategies here is your location matters. I don't know if this alone is a reason to relocate.

But in city limits, outside city limits, you may be subject to some different taxes and expenses from state to state property taxes can vary quite substantially. So is that alone reason enough to relocate? And I know that people have done it in the past.

I don't know if it is a true retirement strategy, but having the mortgage paid off, whether that's the day before retirement or at some point within the retirement timeline, we know that it will be paid off. That sort of can can be an inflation protection component as well. And certainly it's nice not to have debts. But yeah, the property taxes, you can appeal property taxes if they do increase those. But that's not always successful.

It's not going to be 100 percent that that you are awarded that that appeal. So it is really just a matter of understand what those taxes are going to be if you are going to remain in the current home and then plan that that is a part of the retirement picture and the expenses and that property taxes do often increase over time. So we're going to make that as well. Another necessary expense that is also increasing over time, insurance premiums. Peter, I mean, this is and it feels like every headline right now.

Yeah. Well, the insurance companies have petitioned for much larger increases than they're actually being granted. And so this is kind of an ominous type type of stat. How much they have increased is not nearly as much as the insurance companies have said they need to increase them, but certainly they have gone up significantly. And insurance insurers are even pulling out of states for for certain reasons. I know on the coast of North Carolina, we've had several insurance companies pull out because of the storms that we get. And I know that, Aaron, you up there in Minnesota recently also had insurance companies pulling out of the market. So, I mean, these are these are indicators, right, that maybe the cost is going to continue to increase on insurance. One thing that you can do is shop around because it's unfortunate, but it's not like these companies go to their longstanding, most loyal customers and say, hey, you've been with us for so long and paying your premiums. We're going to give you our absolute best rate.

In fact, it's quite the contrary. Holding on to an existing policy oftentimes is not beneficial for you. And shopping around for rates often has like a new customer discount kind of thing in the first year or two.

So, yeah, every couple of years, it's it's really worth going through every expense on that line item budget and just evaluating. Can we do better? Can we shop around? How long has it been since we shopped around?

But particularly, it seems like with the insurance, that is one area where every year, every couple of years, you could probably get get get some reduction or some kind of discount, at least from the current and increased prices you may be paying if you stay with the existing company. And then again, we have to talk through groceries. This is where we bring up that dreaded word, though, of having a budget.

Right, Peter? Yeah, nobody loves it. Nobody loves the word budget. But groceries are one of the biggest items in the budget these days and significantly more expensive than it seems they were ten, five years ago. So we've got to we got to eat and groceries and food is going to be part of that budget. And really, regardless of what else we're spending, this is one of the staples, right? The roof over our head, the food on our table.

Lights are on and have some reliable transportation. Those are kind of the four staples that we really must have before we add or include any additional surplus expenses. And the food has gotten more expensive. So just be thrifty. Plan meals out ahead of time.

Eating out certainly is not the most budget friendly way. And you've got this thing from Napkin Finance up on the screen. I hear this a lot, this 50, 20, 30 rule. And I always think when when I see this, that 50 percent is essentials and then 20 percent are financial goals and then 30 percent of the budget is flexible. But you've got to remember that off the top, we've got to account for taxes. So this is really probably just 75 percent of the total income that we have.

And then we're doing these sub subdivisions here. But but yeah, I don't think you can put the 30 percent of flexible spending and classified groceries and food as one of those expenses that has to fall into the essentials. And it seems like the essentials is a bigger and bigger piece of the pie. And then if you're about to retire, diversifying income streams is very important. But you also need to ask yourself if you are adequately accounting for inflation and then have that honest conversation with yourself about whether you should consider a hybrid retirement. Yeah, I mean, why are we wanting to retire? Are we truly financially prepared for retirement?

These are questions hopefully that you're talking through with a planner adviser well before and certainly leading into the decision of when to retire. But true financial confidence is having enough income to cover expenses and then a little left over that you can continue to save and invest. And that does not change on the day after retirement.

What does change is what we no longer have the paycheck that gives us that confidence. Now it's our investments and assets. So in retirement, not spending as much is equal to saving more because we've already got the dollars in savings or investments somewhere. And we can either kind of divide out the assets in the bucket approach and strategy that we've talked about, Aaron, often where we've got one bucket that's accounting for this year and maybe the next few years of expenses kind of at the front. And then we've got an intermediate bucket that is growing, but very conservative.

And then we've got a long term bucket on the backside that is growing maybe more aggressively. And either we're not taking as much out of those first buckets or we're creating the income so that we in retirement still have a little left over from the income that we can begin to drip it and add it back into that bucket that is last in line, that long term growth. And that truly, if we can accomplish that, that is a very confident kind of position to be in for retirement.

But again, simply not pulling as much out of those retirement assets and investments could be said to equate to the same thing. We've just got a target in on the income that we need and be as efficient in creating it as possible. And last, of course, invest wisely in retirement. It is crucial to strike a balance between preserving capital and generating sufficient returns to combat inflation. And this is where working with a financial advisor can really help. It really can, because the financial advisors may be able to point you into a direction where within that time optimized portfolio, you have more appropriate kind of investments. The market is going to go up and down over time.

Over time, it has always not only come back from downturns, but surpassed previous highs and continued again over time on an upward direction. So we definitely want to utilize the power of growth present in the market. But in any given time period, we also don't want to subject the dollars that we may be using in the near or immediate future or right now to downturns because then the investment can get off track and the projections for what future years look like can be completely different. So, yes, we want to use the power of the market, but we also don't want to jeopardize the current income producing dollars and put too much risk on that. And that's where the old asset allocation model of a 60 40 portfolio for retirement may need to be reevaluated, because while the concept and idea of diversification is important, it is important that we also look at asset location. And that shouldn't all be subject to the market.

We need to have some non correlated assets, some assets that aren't going to all move in the same direction at the same time, especially with those near term future years income producing dollars. So much to consider here, Peter. And again, I think some people probably have some questions about how they can prepare for these expenses and any kind of strategies you have to avoid them.

What's the best way to reach you with questions? Give us a call at Rashaan planning nine one nine three zero zero five eight eight six nine one nine three zero zero five eight eight six. We put together that optimized retirement plan for clients or anyone looking to have a plan for their financial future.

No cost, no obligation. And it covers income investments, taxes, health care, legacy, inflation needs to be addressed with the income and the investment piece. And then taxes, certainly, I feel, are probably also going to go up into the future.

And we need to address that sooner rather than later is going to be better for most folks. All right, Peter, thanks for your time today. Always a pleasure. And thank you.

Everyone, Peter Rashaan here. Hope you enjoy the content. As always, make sure that you like, subscribe, share the videos with others that may find this information helpful. And as always, you're welcome to be in touch or to submit questions or comments. You can comment below the video anything that you'd like to see or hear shared on our YouTube channel. And in future videos, if you've got a topic that you've been thinking about or is of concern for you financially, be sure to let us know. We'd love to help you by discussing it on the channel. So appreciate the continued views and the likes and the subscribes, the shares, the comments always helpful. We look forward to getting you the information that you need.

This has been planning matters radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to take investment tax or legal advice from an independent professional advisor. Any investment and or investment strategies mentioned involve risk, including the possible loss of principal advisory services offered through Brooks own capital management, a registered investment advisor. Piduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission, which may result in a conflict of interest regarding compensation.
Whisper: medium.en / 2024-06-08 10:20:06 / 2024-06-08 10:25:49 / 6

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