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Jean’s Journal June 5, 2017

KISS Keep it simple stupid!  

Why did I start with this acronym?   It starts with an observation of human nature. We are all creatures of habit – really.  I think of the habit my dearly departed Navy father taught me by example – get up, make your bed and get to it every day. As an early riser, and the daughter of a Navy guy with German heritage, how could I not be the morning person I am today?  Other keys to habit forming are all about money.  I just saw a promotion from the incredibly successful Dave Ramsey. He preaches some pretty common sense approaches for money management but as a financial planner – I see it every day. 

How we approach money and how we handle the loose change in our pocket – impacts our long term success.  Big and small decisions and good habits formed as children and cemented as adults, improve the odds of financial success. Good habits implemented in our 20’s on savings, spending and living beneath one’s means.  Watch your debt and pay down consistently as well as not spending without intent.  I think many of us have made the “impulse purchase” and new temptations to spend with Amazon Prime make it very difficult.  Put down the phone and don’t buy the latest gimmick or “new thing”!  When we sleep on a purchase for 24 hours – I think all of us will spend less and likely save more.  

Good habits built into retirement savings: 

  1. In the 401(k) - To automate your savings and to automate your savings increase. Our firm starts all new employees at 6% deferral and then rises each year to a 10% level.  Again – habit forming, you never “see” those extra dollars and the 1% increase feels minimal and hopefully in line with some level of pay increase.
  2. Do this with “a match to additional savings” i.e. systematic sweep to savings then investment accounts can improve your odds of creating that emergency reserve and additional savings.
  3. Consider ranking your purchases with a “needs vs. wants” view. Needed may be new tires or brakes but perhaps not a “trip” to the Bahamas in January – although it may seem like a need in the cold of winter.
  4. Prioritize your life and frame up other good habits tied to spending needs.  You need a good workout but do you need the personal trainer or club membership to get in good shape.

So why am I pontificating the rewards of good habits?  There are few great nuggets in this article on handling your withdrawals and spending needs in retirement. Retirement Withdrawals  

Good habits for retirement spenders:

  1. Automate your distributions to lessen impact of timing as well as the curse of a good market.  Retirees will tend to equate short term gains with the ability to “spend more” from your retirement accounts.  Sadly – we cannot cut your spending off in a down market any more than we advise improved spending or gifting in a good market.
  2. Also, 4% spending goal is a rule of thumb – we actually prefer a lower number closer to 3% to start and with less “risk” of loss in your first years of retirement as the impact of loss at this stage of distribution has the largest dollar impact.
  3. Rank your spending, gifting and needs/wants – same as above. 
  4. Make sure all of your wealth is working for you. Lazy cash balances need better management.  Cash is not a long term option for investment. Have all of your money work for you now that you are done working!

As we enter the robot revolution in our lives, think about the habits of good money management as well as health management – both will likely bring you dividends for many years to come. 


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