Search Results for: budget

Beating Broke Rules: Budget

July 2, 2008 By Shane Ede 3 Comments

If you’ve ever been involved with a company’s financials or been an investor researching a company, you likely know that they all have budgets. In fact, they would have a pretty big problem if they didn’t have budgets. And even with budgets, they still have problems when those budgets are unbalanced at the end of the quarter. An unbalanced budget that is in the red can cause a paper loss of millions (or billions) in stock price. That makes for a lot of unhappy investors (read owners).

Why shouldn’t those same rules apply for your personal finances?

Beating Broke Rule: A budget is a must.

Let’s face it. Only the Government gets away with an unbalanced budget. If you or I were to take up similar fiscal actions, we’d be declaring bankruptcy every year. The bottom line is this; If you want to be fiscally responsible and be in control of your finances, you’ve got to have a budget. And it must balance. Must!

Let me finish by finishing the analogy. Think of your personal finance situation as a “business”. You and your Wife (or partner and any children you may have) are the shareholders. When the “business” does poorly (i.e. runs in the red) the shareholders lose value. Only, instead of being able to sell the stock and find a better performing “business”, you have preferred stock that is non-saleable. What’s more, you’re the CEO, CFO, CIO, and mail room attendant. There is nobody you can fire for poor performance and you can’t trim your labor costs with layoffs.

The only way for your “business” to perform well is to have a budget that balances. If you really want to make your “shareholders” happy, you’ll find a line item in there for savings as well.

Analogies aside, a budget can really help you see where your money goes and helps you get in control of your money. Instead of trying to find a few dollars at the end of the month to pay bills, you might just find a few extra for an ice cream cone or two. If you’re curious how to create a budget, read my article on building a simple budget to learn how we created our first budget.

How Much Money Do You Actually Need to Escape The Rat Race?

July 10, 2025 By Teri Monroe Leave a Comment

Escaping the “rat race” means reaching financial independence. This is the point where you no longer need to trade your time for money just to survive. True independence gives you the freedom to choose how you spend your time without being tied to a paycheck. The amount of money you need to achieve this goal depends on several key factors, including your lifestyle, expenses, and long-term plans. There is no single number that applies to everyone, but we will walk you through how to estimate your target and how to start building toward it today.

The Core Formula You Need

A popular method in the financial independence community is known as the 25x Rule. To use it, calculate your annual expenses and multiply that figure by 25. The result is the amount of money you need to have invested in order to retire or leave the workforce. This method is based on the 4% Rule, which suggests you can safely withdraw 4 percent of your portfolio each year without running out of money. For example, if your yearly expenses are $40,000, you would need $1 million invested to maintain your lifestyle indefinitely.

Calculate Your Annual Expenses

Start by tracking your spending over a few months to understand your actual annual expenses. Be sure to include essentials like rent or mortgage payments, food, transportation, healthcare, insurance, debt, and entertainment. Many people are surprised by how much or how little they truly spend. Once you know your number, you can begin budgeting or trimming costs to bring your goal within reach. If saving $1 million feels overwhelming, keep in mind that every dollar you cut from your yearly spending reduces your target savings by twenty-five dollars.

Customize for Your Lifestyle

Full retirement is not the only path to financial freedom. You can also consider semi-retirement, where you work part-time or maintain a side hustle to cover some of your expenses. This reduces the total amount of savings you need and allows for more flexibility. Another option is called geoarbitrage, which means moving to a country or city with a lower cost of living. This can dramatically reduce how much you need to escape the rat race. These strategies can give you more breathing room and make financial independence feel more realistic, even without a million-dollar portfolio.

Getting Out of the Rat Race

Your escape number depends on your lifestyle, location, healthcare needs, and whether or not you want to continue working in some capacity. Some people want to stop working completely, while others simply want the freedom to walk away from a job that no longer serves them. Either way, creating a personalized financial plan is essential. Track your expenses, define your goals, and choose an approach that fits your values. Escaping the rat race is not about getting rich. It is about gaining control of your time and living life on your own terms.

7 Unexpected Expenses That Are Quietly Killing Your Retirement Fund

July 3, 2025 By Teri Monroe Leave a Comment

Unexpected expenses that are draining your retirement fund — Image Source: Pexels

You’ve saved, planned, and dreamed of a stress-free retirement—but what if your nest egg is being drained without you even realizing it? Unexpected expenses can quietly chip away at your hard-earned savings, leaving you financially vulnerable in your golden years. From overlooked healthcare costs to inflation, these hidden budget busters can derail even the most careful retirement plan. Here are seven sneaky expenses that could be slowly killing your retirement fund.

1. Healthcare Costs

Even with Medicare, retirees face substantial out-of-pocket expenses. Premiums, co-pays, prescription drugs, dental, vision, and hearing needs all add up. Long-term care can cost tens of thousands annually and catch many off guard. As your health may decline, healthcare expenses, even before retirement, can erode your savings. It may be worth it to invest in a more robust healthcare plan if offered by your employer. You can also look into secondary insurance if your coverage isn’t adequate.

2. Helping Adult Children or Grandkids

Since the cost of living has increased and the job market has its ups and downs, many adult children need more support. Many retirees provide financial help to adult children or grandchildren. In fact, as many as 50% of Boomers are helping their adult Millennial and Gen Z children. Whether it’s paying for college, helping with rent, or covering emergencies, this generosity can significantly drain retirement savings, especially if it becomes ongoing. While many Boomers have felt the need to help Millennial children, it may ruin retirement funds.

3. Home Repairs and Maintenance

Owning a home during retirement comes with hidden costs. Aging roofs, broken furnaces, plumbing issues, or necessary upgrades can result in sudden, high expenses. Without a maintenance budget, these costs can derail financial plans. It may be more beneficial to find a condo where the HOA pays for some maintenance.

4. Inflation and Lifestyle Creep

Even modest inflation erodes purchasing power over time. A 3% annual increase may seem small, but it compounds. Pair that with lifestyle creep, like dining out more or traveling, and your retirement fund might not stretch as far as planned. Some people end up taking out personal loans or dipping into retirement funds early to cover these expenses. At some point, it becomes too late to save enough to retire on if overspending continues. A solid budget, where you don’t deviate, is imperative.

5. Taxes on Retirement Income

Retirees often forget that income from traditional 401(k)s, IRAs, and even Social Security may be taxable. Without tax-efficient withdrawal strategies, a significant portion of your income could be lost to the IRS each year. Make sure that you consult a tax professional so that you account for any tax implications.

6. Divorce or Separation Later in Life

“Gray divorce” is on the rise and can split retirement assets, increase living expenses, and lead to legal costs. Starting over financially in your 60s or 70s can drastically change retirement expectations. Many couples end up staying together, despite unhappiness, to be able to afford retirement. While this isn’t ideal, many couples just don’t have enough saved to weather a divorce later in life.

7. Scams and Elder Financial Abuse

Older adults are frequently targeted by scams, from phishing emails to fake investment schemes. In some cases, financial abuse comes from family members. These losses are often unrecoverable and emotionally devastating. Make sure that any trustees or anyone who has power of attorney is trustworthy. You may even appoint a third party, instead of family members, to avoid any elder abuse.

Managing Unexpected Expenses That Drain Retirement Funds

When preparing for retirement, it’s best to expect the unexpected. Having a solid plan, budgeting, and saving for the future is essential. Give yourself a healthy cushion, so that when expenses hit, you’re prepared for any unexpected expenses.

The Benefits of Putting Money Away for Potential Medical Expenses