When Your Needs are Actually Wants
One of the first steps to creating a retirement plan is to work out a budget or cash flow projection to see where your money will be spent. Then you slash all unnecessary spending out of the budget and move on to expenses that are deemed necessities. When determining your needs or wants it is important to keep things in perspective.
The difficulty lies in trying to convince someone that what seems like a necessity can actually be reduced or eliminated because many people overbuy on real needs.
It’s common to think it’s just young people who rush out to buy the latest electronics and fashions because they think they’re needs, but people in retirement are also guilty of maybe not so much buying new things, but being so comfortable with the status quo that they’re adamant about not making any changes.
Needs or Wants?
You need somewhere to live, preferably in some comfort. But once the kids have moved out do you still need the huge five-bedroom house? Okay, some people do. They have relatives who regularly stay with them. Or, they convert part of their home into a rental unit or Airbnb suite.
Most of us however would be perfectly comfortable in a smaller home. The reduced costs of utilities, insurance, taxes, maintenance and upkeep are a lot easier on the budget.
What about the memories – the door jamb that recorded the kid’s growth, the tree you planted when you first moved in? Look through your old photographs and you’ll have plenty of memories to reminisce over. Do you look at that tree fondly, or has it become just another obstacle to mow around?
You need to eat. Food is getting more expensive, but there’s no need to regularly buy out-of-season produce and expensive cuts of meat. Also consider how many times a week you eat out at pricey restaurants.
You probably each needed a vehicle to go to work or drive the kids to all their activities, especially if you live in the suburbs. Could you get by with only one vehicle now. If not, you probably don’t need a huge SUV that can take a family on a wilderness trek if all you do is drive to the grocery store.
You need clothes, but not an entire new wardrobe every season. Once you’ve stopped working you don’t need all those business suits and work clothes. Yes, I know they were expensive, but you’re not going to wear them on the golf course. You can donate them to a charity such as Dress for Success or Goodwill and help someone who is struggling financially.
You need major appliances – stove, fridge, dishwasher (maybe) and washer and dryer – for convenience. When you’re in the market for a new appliance, you don’t need the top of the line product with all the bells and whistles, most of which you’ll never use anyway.
Speaking of upgrades, you don’t need the newest version of the iPhone, tablet, laptop, Playstation, etc. and all the latest gadgets and accessories that go with them. Let’s face it, whatever you buy, a new and improved version is already on its way to the stores.
You don’t need an 84-inch TV which seem to be heavily marketed to seniors. If you’re not willing to cut out TV entirely (and most of us don’t want to) consider cutting extra services or beefed up channel selections. You and I both know that even with 500 channels there still isn’t anything worthwhile to watch and life can be immensely enriched by listening to music, reading and socializing instead of sitting in front of the tube.
The bottom line
Once you’re used to a level of spending and owning it’s hard to downsize but when you overindulge on features it becomes a luxury, not a need anymore. There are also self-created needs because you bought something that requires additional accessories or ongoing purchases to keep it up to date.
With your retirement goals in mind, think of your current possessions and ask yourself, “Will this be important for my new life in retirement?”