Wednesday, October 28, 2009

6. Make a his and hers bucket list and 7. Discuss your lists together

Now I can't stress how important I think it is to make your bucket lists.  For those of you that may have missed the movie "Bucket List" let me explain.  Your bucket list is simply a list of things you want or need to do before you die.  Simple as that! So if you always wanted to learn mandarin Chinese or walk the great wall of China then put it down on your bucket list.  Put it all down on the list.

Even more important if you will be retiring with a partner is to have them also make their bucket list.  Then compare your bucket lists and you may find that you have many things in common ... or not.  However, as I stated before this simple exercise allowed us to determine that we weren't ready to settle down in Florida yet even though the real estate values there had plummeted making it relatively cheap to relocate there.

Looking over our bucket lists we noticed that they included a lot of travel items... want to see Arches National Monument, want to hike on the Appalachian trail, want to see Yosemite etc. So as a result we determined it might be best for us to travel for a year or two ... or more before we settle down in retirement.  Also, traveling may help us better determine where we want to finally retire.

So now we are researching and investigating the RV lifestyle to see if that appeals to us... but that is another story!

Saturday, October 24, 2009

5. Where do you want to retire and what do you want to do?

The question of where you want to retire and what you want to do is a question that is very hard to pin down.  One of the things I recommend is that you and your spouse (or just you if you are single) construct a bucket list.  Once you create a bucket list with all the things you want to do, to see, or just to visit it will help determine what type of life style you should pursue in retirement.

My spouse and I initially thought we wanted to retire near the beach and were looking at Florida since the real estate market there was in shambles and we thought we could pick up something inexpensive and live near the beach.  However, the more we talked the more we were uncertain about it.  It wasn't until we came up with our bucket lists and compared them that we have come to the conclusion that we might best be suited to purchase an RV and travel around a lot before we settle down.  If we hadn't done our bucket lists we may have made an early retirement blunder.  Now I have a lot to learn about fulltiming in a n RV!

Wednesday, October 21, 2009

4. Determine your retirement date

We now understand better what monies are coming into our income stream and what monies are going out of our income stream. Now for the hardest question to answer - When can we retire, in other words, what is your retirement date?

The very best way to assist yourself in determining the WHEN question is to better understand what your needs will be post retirement. Some expenses may disappear but others will likely replace them. Some say they will no longer be paying for the kids education but they want to travel more so the costs tend to balance out. A lot of people have said openly that their expenses don't change a great deal in post retirement, however each person is different. I believe I will need about 85 percent of my w*rking income in my retirement years.

But a great exercise is to come up with different spending scenarios and run the numbers through firecalc or other retirement calculators. Also, use different retirement date scenarios along with the expense scenarios. Looking at the results of each one of these scenarios will allow you to better determine when you can retire which will assist you as to when you should retire.

For me my date is February 2nd or March 2nd. For now I am calling it Feb, 2nd 2012.

Tuesday, October 20, 2009

3. Run your numbers through a retirement calculator such as firecalc

Once you have gotten a thorough understanding of what your revenues and expenses are currently, what do you do next? I recommend that you need to start running through different retirement scenarios to see what will work best for you. One of the best online and free products I have come across is the firecalc calculator.

Run your numbers through a retirement calculator such as firecalc (firecalc calculator ) to see whether or not you are reaching your goal of retirement. There are many other devices and tools you can use. Many of which are based upon Monte Carlo simulation models but I highly recommend using the firecacl calculator along with the use of your own personal advisers or your own excel spreadsheets.

Sunday, October 18, 2009

2. Get your expenses in order...

I already talked about getting control of your most likely largest expense in a previous blog - your mortgage. But it is equally important to get all of your expenses in order. Besides your mortgage you need to pay off all the debt that you can... Pay off those cars and pay off those credit cards if you have them ASAP!

To better understand my expenses was to go back in time and record all of our expenses in an excel spreadsheet. This was easy for me to do since all of my expenses are paid out of two accounts. Our primary bank account and our primary credit card provide us all the numbers we needed. Between these two accounts I was able to easily categorize our expenses.

I created a column for each category of expenses I wanted to track and by doing so it made it very easy to see where our largest expense categories were. For us they were department stores and travel. Well having discovered this made it very obvious to us which category was needing our attention. We needed to begin a reduction in expenses and it wasn't going to be in the category travel. I now have 17 months of expense data in my spreadsheet along with the same number of months for our revenues. Our financial picture has become clearer and even more clearer is what we need to do to prepare us for reduced income in our future retired lives.

Thursday, October 15, 2009

1. Get you finances in order

This item is the foundation of what makes a successful retirement happen. You must have a really good understanding of what your revenue flow is. When you are w*rking this is easy as you can always look at your weekly or monthly paycheck and go from there.

When you retire that paycheck no longer comes in and the income it brought must be replaced? How will this happen? Well hopefully by the time you retire you will have alternative income streams available. These could be in the form of pensions (not likely anymore), IRA savings, 403B's, 401K's, rental income, stocks, savings or many other income producing instruments.

You must sit down and collect all your income streams and put them on paper or in a spreadsheet for further analysis. Will these income streams provide you with the necessary income for retirement for the "X" number of years that you will be alive post-retirement. If not plan now for the future and start saving or investing wisely to provide for your retirement.

Monday, October 12, 2009

So we have a target... make a list!

So now that I know the date that we wish to retire... everything from this point forward means we are working towards getting everything done that needs to be done before retirement.  Whew! What a mouthful. So what needs to be done? Below is a list that I used to get ready, some of the items have already been discussed.

1. Get you finances in order
2. Get your expenses in order
3. Run your numbers through a retirement calculator such as firecalc
4. Determine your retirement date
5. Now the hard part - where do you want to retire and what do you want to do?
6. Make a his and hers bucket list
7. Discuss your lists together and using these discussions you should be able to get a better idea of the answer to question 5

I will stop here and add to the list later because of the importance of item 5 above.  My wife and I  had initially considered retiring in Florida since the price of real estate was cheap and the life style of living near the beach appealed to both of us.  However, after looking over our bucket lists it was apparent that we had a lot of traveling to do before we settled in for any duration.  We are now investigating full time RV'ing and even looking into retiring/traveling overseas.  So for us now we have lots of research to do...

Sunday, October 11, 2009

Getting your numbers in order...

So I talked about how we got our expenses into numbers into a spreadsheet now we have to get our revenue streams or income into numbers.  Once we have a better grip on what these numbers mean and what they tell us we will have the predictive means to determine an estimated retirement date.  Since I love spread sheets I started gathering up all my numbers... Roth accounts balances, Traditional IRa's, bank accounts, savings, life insurance cash values, retirement accounts, social security allotments, stocks, bonds, ETF's ... oh my...  So many numbers!

Gathering all your financial records into a spreadsheet can serve two purposes - it serves as a source to retirement planning and it also serves as a source for estate planning by having all your account numbers and passwords etc. in a single place.  Now that makes this file very valuable so I suggest you get one of the free encryption programs to protect this file on your computer.  I use one called Truecrypt.  Now you will be down to only one password that your significant other needs to know to access this very important file.

So after a month of careful scrutiny and calculations my spreadsheet was complete. Using my own spreadsheet and my own predictive future variables allowed to me to project when I would run out of money based upon my projected expenses.  This also answered the question of when we could retire - the answer:

February 2nd, 2012!

Friday, October 9, 2009

So what is next....

Now that we figured out a way to pay off our mortgage early we need to start planning for retirement in other ways.  What about our expenses?  In order to retire at the earliest time we can we have to watch the only two things that we can impact -  savings and expenses.  We have made the necessary adjustment to increase our savings in both the tax-deferred and taxable areas.  So now we need to get a grip on our expenses.

The best way to do this for us was to set up a spreadsheet in excel that allowed us to track in detail what our expense were currently.  So I went back in time and pulled all of our financial records together and recreated our expenses for the last 16 months.  Since we have never really budgeted but always watched out for our money's best interest this provided us with a snapshot of what we were really spending.

Our two biggest expense categories were our travels (we love to travel) and department stores!  Department stores????  Now that had me scratching my head... it appears that my DW loves to shop more than I had originally thought.  We sat down and discussed this new information and decided that we should not change our spending habits at all at first.  But we should at the very least start asking the question - "Will I really need this in my retired life?  This has resulted in us not buying any big ticket clothing and other w*rk related items that we won't need after two years and thus, don't really need now.  We will see what this does to our expense over the next 4-5 months. My guess is they will drop some.

Thursday, October 8, 2009

What to do with all this money...

So paying off your mortgage is the single best thing you can do to get you ready for retirement. In our case we were paying double principals for 5 years and 3 months... guess what! At the end of that time we owned our house and had a whole lot of money that was no longer being paid to a mortgage. So what did we do with that money?

Every month after we paid off the house we continued to make our mortgage payments as we had always done except we were paying them to a 403B tax deferred account. It is amazing how fast that money adds up over the course of a few years. Fully diversified in vanguard accounts makes the money grow even faster due to the lower costs of ownership.

This is one of the best ways to fluff your nest with more dollars for your future retirement. It's not too late to start now as we still have many more Mondays to w*rk before we retire.

So what is next....

More about me and my quest...

Most of my life has been dedicated to enjoying each and every day. This philosophy never became clearer that when my lovely bride of 34 years was diagnosed with breast cancer. It wasn't until this day that we both sensed our real mortality and realized that time would run out if we didn't seize the moment. So starting that day we spent a larger portion of our budget on travel. This was four years ago as my bride appears to be in complete remission.

Also, at this time our lives required some tweaking with regard to our retirement planning. We had to decide between "living for the moment" and "living below our means" (LBYM)... difficult to say the least. The first real decisions we made were to take one really big trip per year, to fly out east in the spring at least once a month to watch our athletic daughter play sports for a division 1 school in North Carolina , and we decided to pay off our house as fast as we could. A mix of living for the moment along with a smattering of frugality allowed us to do this.

The simplest way for us to reduce our expenses and pay off our mortgage really fast and early was to pay double our Principal and Interest. By paying double we reduced a 15 year mortgage by over 60 percent in months of payback. Paying this way reduced our disposable income forcing us to make life style changes to accommodate our new budget. This worked for us... as a result we now own our home outright!

More to come....

Wednesday, October 7, 2009

The Beginning of the Future!

Well here I am at the apex of my work life looking down towards the retirement part of my being. I have had a very eventful working life but now am longing towards my retirement days... my target is February 2nd or March 2nd, 2012. Only 121 more Mondays until I am set free.

About me: I am now 54 years young and early in my life I decided I needed to do as much as I could do while I was young while I could do it. I was an avid backpacker and outdoor enthusiast. I traveled every where I could afford. I married very early in life to my wonderful bride of 34 years and counting. Interesting enough we were very opposite in what we enjoyed but over time we have slowly migrated to a mid point... I admit it is skewed in my direction.

... ahhh the beginning of my blogging career seems to be coinciding with my wish to retire. This blog will be dedicated to this pursuit of figuring out how to best retire and obtain the worldly riches we desire. These riches will be anything but monetary since true happiness can be obtained in many different ways. On to this pursuit...