This & That: Enough Edition

D Wrote: I have searched your archives and have not been able to find anything related to my inquiry. My wife and l are retired and still under 65. We have a net worth combined of somewhere near 2 mil. With no debt and are by no means “wealthy”. Just a hard working frugal couple with no children. My question may be the foundation for another book or television series. The question is: Having accumulated this “wealth” of Stocks, mutual funds, property and THINGS at what point should we begin spending? It is not an amount of money so great as to allow unfettered spending but we should like to do some travelling while still “young”. We have no heirs and do not care to leave anything for the tax man. Most financial planners we have encountered only advise on saving or accumulating more wealth and none can suggest when enough is enough. Absolutely love your programs and have a couple of nieces that may qualify as “Princesses.”

Gail Says: What a great question: When is enough “enough?”

How much you’ll need is dependent on your current age and life expectancy, your sources of income as well as the lifestyle you want to lead: your budget.

You’re under 65, but how far under? And how long do you anticipate living? Are you healthy? Did your parents live to ripe old ages? The longer you’re in retirement, the more money you need. And if one of you is going to outlive the other by a significant amount of time, then your plan needs to take that into consideration.

Sources of income are important too. Do you have pensions? Are there survivor benefits? How much? Will you get the max in OAS and CPP? Most people don’t realize the average payout from OAS and CPP combine is just a little over $7K a year each. But if you get the max, you could get as much as $16K each. Deciding when to take CPP is part of that calculation since if you think you’ll live a long, long time, you may want to delay your CPP and get more (your payout goes up for each month you delay taking CPP after age 65) to act as inflation protection.

You say your net worth is somewhere near $2 million. If a large part of that is wrapped up in your house (or other hard assets) are you prepared to sell and realize those assets (or part of those assets) as part of your retirement strategy?

Have you done a budget for retirement that delineates the “must haves” and the “nice-to-haves” so you know exactly where you stand financially?

 

C Wrote: I have the opposite problem that most seem to have. I am a pathological saver! I pinch pennies to my detriment, even when I was only bringing $32,000(net) living in a big expensive city I still managed to save 26% and put 27% towards my car payment. I don’t know how to relax and have fun. This really upset my partner who is the complete opposite. How do you relax and live a little while still being responsible.

Gail Says: When I was in supersaver mode after my last relationship ended I actually had to put a line on my budget called “pleasures”, allocate a specific amount to the category (it was $200 a month) and make myself spend it. Try that.

 

S Wrote: I am barely 11 years old and I already have over $650 in the bank because of how awesome you and your shows are. Turns out I am richer than practically everyone on your show!

Gail Says: Yes m’love, you very well might be. And you’re pretty smart too. Good for you. Now let’s see how good you are at teaching your friends and family about how to be sensible with their money! You go girl!

 

N Wrote: I have written to you a few times, but I have not seen an answer to my questions on your web site. I enjoy watching reruns of your shows, and I think I am learning, but my husband and I are having a difficult time. Our income is sky-high (we are in the 1%), yet we cannot manage a monthly budget. We live a life that I fear is beyond our means, and although we save about $60,000 per year, I believe we could be saving 3 times that amount with no pain. We are Money Morons, despite our many degrees. My husband is famous in our small city, and he wants everyone to know how fabulous we are. For example, we have memberships at the Faculty Club, the Royal Glenora and the Derrick Club, plus his health club membership at the Hotel Macdonald. We don’t just take luxury holidays; we get the best suite on the boat, and the best suite at the hotel. We have three kids under 5, I am not going back to work, and I worry about the future. My father is a capable financial planner, but I am ashamed to have him know how much we could be saving vs. how little we actually are saving. Even well-off people need your help. Please help us, Gail. I can give up Escada and shop at the Bay. I do not need the extravagant jewelry. I like it, but I don’t need it. We need some help getting straightened out.

Gail Says: You say you fear you are living beyond your means in one breath and then tell me you’re saving about $60,000 a year in the next. M’love, if you’re debt free and saving $60K a year, you are doing fine. Seriously. But maybe it is that you don’t actually know the ins and outs of your finances and that’s got you a little creeped out. Could it be that your partner does the money management in your family and you’re feeling out of the loop? If so, I suggest you gather up all the paperwork, do a spending analysis, a budget and a net worth statement and see what’s what. That should put your mind at ease.