How to Transition From Being a Prudent Saver to a Prudent Spender Once you Retire

Have you been a lifelong saver?  You’ve spent your entire career preparing for the time you’ll stop working and now everything changes.  One of the biggest transitions in life is to go from being a worker to a retiree and it may be hard to change your mindset.

If you’ve been a saver most of your life, how do you shift to being a spender once you’re retired without getting anxious?

You have your own vision of what your retirement life will be and you should be spending your assets according to that vision.

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Revisit your budget

The best way to combat anxiety about spending is knowing what you can afford to spend – that’s your spending plan.  Prepare a detailed cash flow projection all the way to the end of your life. 

Don’t forget to include a generous emergency fund to cover unexpected surprises like car repairs, a medical procedure, or your grandniece’s destination wedding.

You want to manage your cash flow responsibly while living your great life without scrimping unnecessarily.

Set yourself a monthly retirement “paycheque” rather than looking at your retirement funds as a big dollar amount to draw from as needed.

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For the first year, spend according to that budget.  To avoid underspending allow yourself to use all that money.  Then see how your projections will look the following year. 

Having a detailed spending plan in place can eliminate your worries and you’ll be happier knowing that you’re covered.

Have a withdrawal strategy

Use “buckets” to hold cash for short-term expenses and withdrawals.

If your fixed expenses increase you may have to withdraw more from your investments to cover them.  But before you do that, review your expenses to find less expensive alternatives that are similar to what you do now.

Your retirement withdrawal strategy is a work in progress and should be open to change if it doesn’t work for you.

You need to learn to be flexible when you consider your lengthy retirement time frame.

The bottom line

Too often people spend a lifetime accumulating wealth only to realize all they have is accumulated wealth.  Instead, money should be viewed as a tool to help you focus on the things in your life that truly matter to you.

The transition from saver to spender is a huge change in mindset and it might take some time to get used to.  Changing behaviour can be difficult.  You have to modify your habits and adjust to a new lifestyle.

You’ve saved enough and you’ve got your plan.  It’s okay to spend.

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