The Retirement Mirage: Time to Think Differently

By Nancy J. Hite

Don't be fooled by the retirement mirage.   

Are you still buying into the retirement mirage, hoping that, once you stop working, your life will be a perpetual enjoyment, exploration, and pleasant exper

• Language: English
• Publisher: The Strategic Wealth Advisor. LLC
• Release date: Feb 16, 2021
• ISBN: 9781734876628

Book preview

Chapter 1

The Credit Trap

At fourteen years old, Barbara received her first credit card allowing her to be authorized to charge on her mom’s account. Her mom felt the $500 limit would give Barbara some spending money while teaching her how to control her finances. Instead, since her mother paid the monthly credit card bills, Barbara learned credit meant easy money. She just presented the card, and money appeared. What could be easier?

Ten years went by. Barbara got a well-paying job as an architect, which enabled her to get even more high-limit cards. She bought a car new, direct from a dealer (on credit, of course), and filled her apartment with nice furniture. She wore the newest fashions and ate at the best restaurants. Barbara continued along, accumulating debt, until this scenario unfolded at the bank...

Sorry, the guy behind the thick glass said, I can’t give you another loan.

What? But . . .

It’s not me. Computer says no.

But why?

You still haven’t paid off the last one.

But you gave me a payday loan last month.

Yeah, like I said, you gotta pay that back. Can’t help you.

But how will I eat?

Your problem. Can’t help you.

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I don’t know what I’m going to do, Barbara confessed to her best friend, Tammy, over lunch.

What do you mean?

My debts. They’re much too high. I feel like I’m drowning.

Really? But I thought you had everything under control.

That’s what I thought also, but those stupid student loans . . .

But you have more than that?

Oh yeah. Five credit cards, a car loan, line of credit. It’s bad.

Any ideas?

I’m fresh out.

I was in debt to my ears a couple years ago, Tammy said.

You had debt problems?

Yeah. Still do. But, now I have hope. I got some help from a friend who was a banker. I will be happy to share some of the things I worked on, and maybe it will help you.

That would be nice—to have hope again.

Come on over to my place after work and we’ll talk about it.

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After work, Barbara showed up at Tammy’s apartment. They watched a movie, had some dinner, and then began talking about Barbara’s financial situation. Barbara explained what was happening.

Then I couldn’t get a payday loan, and after that, the shoe repairman told me he couldn’t fix the heel. Well, I couldn’t help myself. I broke down and cried.

I understand, Tammy said, handing Barbara a tissue. Your shoes are that old?

Can’t afford new ones.

Wow. Well, let’s look things over and see what we can do.

Okay.

What are your goals? Tammy asked.

I just want to get my debt under control—you know, not always be under the gun moneywise.

Okay, we’ll come back to your debt in a minute. Let me ask you this: where do you want to be in three years?

Oh, I love my job, but I need to make more money. I’ll stay where I am—unless, of course, someone offers me more.

Are you contributing to your 401(k)?

Barbara answered, Yes, because the company matches 3%.

Well, Barbara said, I suggest the first thing you may want to do is stop the contributions at this time, take that money, and start to pay down the debt. All right, let’s get back to your credit issues. How far are you behind on your payments?

Actually, not behind at all. I’ve kept up to date, but I’m paying as little as I can.

I understand. From what you told me earlier, you have a car loan, five credit cards, and a line of credit.

Yes, plus a student loan.

Oh? How long have you been paying that?

Going on ten years now. It doesn’t seem to be getting paid off very fast.

Yeah, that happens to a lot of people. They expect to get a great job right out of college, but often that doesn’t happen, so they fall behind on the payments.

Barbara and Tammy discussed each credit card and all her other debt. After that, they moved on to other expenses.

What do you spend your money on each month?

Rent, food, gas, bills, and other stuff.

What is that?

What do you mean?

Let’s explore the ‘other stuff’ expenditures. We talked about your income and expenses, and it seems to me you should have plenty of money to spare each month. But you said money is always tight, so what else are you doing with it?

I eat out a lot.

Okay. How much?

Every day for lunch. It’s too much work to make something to bring with me to work.

And?

I go out every Friday night with my friends for drinks and fun.

Food?

Well, yes.

Okay. Any habits like smoking, drinking, gambling, drugs?

No drugs. I do smoke one pack a day and do some social drinking. No gambling, not even a lottery ticket.

Let’s look at those. Let’s see what you spend each month on drinking, smoking, and eating out.

Tammy and Barbara spent a few minutes working out the expenditures.

Looks like you’re spending almost $200 a month on smoking, another $250 on drinking, and almost $500 on eating out. That’s a lot of money.

Hmmm. No wonder money is so tight, and I never seem to have any left over.

Okay, it’s getting late, so let’s call it a night. Here’s some homework. Get a small notebook that you can carry in your pocket. For the next two weeks, list everything you buy. Don’t make any judgments, and don’t change any of your spending habits. Just list what you spend. We’ll go over it in two weeks. Later, we’ll go into things deeper, but let’s keep it simple for now.

Oh sure, I can do that. I feel kinda guilty, dumping all my problems on you.

Don’t worry about it. That’s what friends are for. See you in two weeks.

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Barbara was right on time two weeks later.

So, what did you learn? Tammy asked.

I spent a lot of money each week.

Did you get an idea where it goes?

Sure. What do we do now?

Let’s look over what you spend and see what we can do to prioritize. But before we go on, how much do you have in your savings?

Savings?

That’s what I thought. You don’t have any savings?

I’ve never saved any money. Why would I do that?

What do you do when you have an emergency?

Put it on a card.

For the next two weeks, every time you want to purchase something, take thirty seconds and ask yourself, ‘Do I need it, or do I want it?’ Now, we will start working on your awareness of where you spend money and on making some decisions each time you think you are about to purchase an item. Continue to keep the list you started in the last two weeks, except this time place a large ‘N’ next to those items you needed when you purchased them and a ‘W’ next to those items you purchased that you wanted at that moment.

I see.

You need to build up some savings, because you must stop using your credit cards for everything. When you have a problem, such as a broken shoe or whatever, you’ve got to have enough in savings to pay for it.

I barely have enough money as it is. How can I save any?

My recommendation is that your goal should be to save 20% of each gross paycheck. I know, I know. Most people can’t do 20% at first, at least not until they make some adjustments in their spending. But you can save 1% to 2% to begin with and work up to it slowly.

What kind of changes?

There’s a lot you can do, but it’s best to do one or two things at a time. Pick something you can confront, and let’s start there.

I have no idea where to start. I’m getting confused, said Barbara.

How about eating out less? suggested Tammy.

But I like to eat out, and I hate to cook!

How about starting with lunch? Just start making your own lunch, bringing it to work, and putting it in the refrigerator in the office. That might give you more than $100 extra each month. You don’t have to cook everything. You can purchase cooked chicken, turkey, tuna salad, or whatever at the market along with cooked veggies, or make a sandwich.

Really? That doesn’t sound too difficult. But I hate making lunch every day.

Make a lunch plan for three days a week. It won’t be easy the first week, but by week two, you will most likely have fun going to the local deli or supermarket and selecting your lunch items. You could check the frozen food case for meals that can be warmed in the microwave at work.

Ugh.

I know. There’s a social aspect of being with people and eating together. You could bring your lunch and join the group without ordering anything except tea or coffee. It’s a good way to start changing your money habits, so it makes for a great place to start.

What do I do with that money?

Put some in savings and start paying down your debt more quickly. See this card? Tammy pointed to a line on Barbara’s list. You’re paying 23.5% interest. That’s by far your worst rate. Pay that card off first.

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Over the next few months, Barbara confronted her expenses a little at a time. She brought her lunch to work four days a week, didn’t run out to buy the newest clothes and accessories, went to the movies once a month instead of twice a week, and even cut down on her smoking and