About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area, that works with clients virtually across the country. Lamar's work with his clients focuses on budgeting, employee benefits, paying down debt, buying their first home, and investing. Lamar is the Founder of Dream Financial Planning, a virtual financial planning firm specifically designed to help young professionals and minorities take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use The DREAM Financial Planning Process ™ to help our clients achieve their goals.
The coronavirus pandemic has been hard on everyone this year, and we’ll continue to see big adjustments in our everyday lives for months to come. Whether you’ve personally battled the illness, faced financial difficulties or postponed important plans, it has not been easy on anyone. But this doesn’t mean you should simply stop planning for the future. Here is why you should start a targeted plan now plus six tips for funding your retirement bucket list.
Planning Your Retirement Bucket List
When planning your retirement bucket list, expect to spend a lot of your money in the earlier years of retirement while you are still fairly young, healthy and mobile. Developing a targeted plan now can help prepare you in several ways.
If you are planning to travel and spend more at the start of your retirement, then you can reduce market risk and spread your savings across multiple channels.
While you would love to do it all, establishing priorities ahead of time is key. Do you want a larger home so that family can visit or would you prefer a smaller house with the ability to travel more? Figure out what means the most to you when creating your retirement plan and bucket list.
Spending Without Guilt
The fear of overspending can keep many retirees from taking a bucket list trip. They worry they will spend too much, which could jeopardize their ability to live well in retirement or leave assets for their children. Planning well in advance and developing a spending strategy can help worried retirees do it all - take that trip, live well in retirement and leave a legacy for their loved ones.
Tips for Funding Your Retirement Bucket List
Tip #1: Build a Strong Retirement Plan
It’s never too early to start saving for retirement. Make sure you have a 401(k) or IRA set up that you can start contributing to (if you don't already) - these will serve as the building blocks of your retirement plan.
Tip #2: Create a Passive Income
Passive income is earnings that you aren’t actively managing - or at least have very little effort in managing. An example of this is something like having a rental property, having a downloadable eBook, managing a website, etc. When you have a passive income, you are able to earn extra income while being able to focus on your actual job, therefore boosting your financial situation.
Tip #3: Eliminate Credit Card Debt
It’s all too easy to let credit card debt climb. But eliminating interest payments (especially if it’s not necessary to carry a balance on your credit card) can boost your ability to add more to your retirement savings. Start by paying more on your highest interest credit cards and then once you have those paid off, work your way down to the other lower-interest earning debts.
Tip #4: Open a Money Market Account
Is a money market account the right choice for you? These are easily accessible, and usually offer a higher return than a standard savings account. Check with your local bank and start to research one that may work best for you.
Tip #5: Lower Your Monthly Bills
Make it a habit to check for unknown charges on your bills. If there are, call the company for an explanation. Try to find the best deals and rates for things such as insurance, internet and cable.
Additionally, you can work to cut costs inside the home by doing things such as:
- Checking your thermostat to ensure you’re not wasting heat or air conditioning
- Changing the filter regularly to help your units run more efficiently
- Lowering your water heater temperature
- Unplugging your unused electronics
- Using cold water when doing your laundry
These things may seem small, but they can produce significant cost savings over time.
Tip #6: Create a Three-Month Emergency Fund
Setting aside enough money to live on for three months can feel like a monumental task. Start slowly by paying down credit card debt, lowering bills and putting anything extra towards your emergency fund. These are useful as they will allow you to pay for unexpected emergencies, such as health issues, car repairs or home repairs. Having an emergency fund will allow you to pay for these things without dipping into your paycheck or savings.
You have worked hard to save for retirement, so even with the hardships of the pandemic, it’s still important that you are continuing to think about your future - and all the bucket list things you want to accomplish in retirement. If you diligently save and plan, it may be possible to reach your retirement goals and check every item off your bucket list.
Dream Financial Planning Process ™
Do you know how much you'll need to retire? The DREAM Financial Planning Process™ is tailored to the unique needs of retirees and those who are less than ten years away from retirement. We'll start with a consultation to learn about your goals, values, and what's most important you. The discussion will eventually transition to the best strategies to liquidate your retirement and brokerage accounts to replace your paycheck and sustain spending during retirement. We'll also focus on issues like the timing of taking social security benefits to maximize your benefit and the type of legacy you want to leave for your family.
Throughout this process, we'll work in a collaborative fashion to uncover untapped opportunities, as well as discover gaps in your current strategy that could be preventing you from enjoying a long and fulfilling retirement. If you'd like a Complimentary Review and risk assessment of your investment portfolio feel free to send me an e-mail.
With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your own savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio feel free to send me an e-mail.
On the first Thursday of every month I send out a monthly newsletter with tips and tricks to help you manage your finances. In the November Newsletter, I discuss year end goals, open enrollment, and the best way to manage your 401k.