Category Archives: Financial Plan

Is The Market Drop and Inflation Crushing Early Retirement Dreams? It doesn’t have to

Financial Plan, Retire Early, Retirement Doubt,

I am starting to think that the recent investment market drop along with inflation are crushing early retirement dreams. That thinking is based on the questions I get and the change in certain Leisure Freak site page visits. There are certainly valid retirement fear-inducing concerns. I’m reminded of my own crushed early retirement dream in June 2008 when the great recession was doing its damage. Just as I was ready to take the leap, the world decidedly shifted against me. The world today has certainly shifted and any early retirement plan needs to shift too. Here’s what I did back then and what we’re doing today. 

Is The Market Drop and Inflation Crushing Early Retirement Dreams? It doesn’t have to

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Should The Double Whammy Of A Market Drop and Inflation Be Crushing Early Retirement Dreams? Not Necessarily

For anyone who has been working and saving for their early retirement goals, this new environment has to feel like a kick to the groin. That’s how I felt 14 years ago too. Conditions were different but just as challenging to one’s psyche. 

For those who recently pulled the retirement trigger, sleepless nights and visits to a trusted retirement calculator may become frequent. We’ve all heard the cautions of how detrimental a market correction during the first years of retirement can have on portfolio longevity survival. Inflation just adds to it.

I’m not a financial planner nor pretend to be one. I’m sure my own CFP will have plenty to say in our next meeting based on historical and technical data. What I’m sharing is what worked and works for us in hopes of adding a little calm to an otherwise difficult period in an early retirement dreamer’s timeline.

Pulling The Retirement Trigger When Things Looks Bleak

Just as when I reached my planned early retirement at age 50 in 2008, there was no real indication of a market bottom or economic certainty in sight. Yes, it was crushing early retirement dreams, but not totally. It only changed my plan. 

The new economic conditions were beyond my control. The first step was getting myself over the disappointment and setting my head right. It takes a clear mind to realize and accept that the long-time plan based on before times economics was over. Then setting into action a new plan. 

Count my blessings – 

As today, there was a lot to be economically ticked off about. My portfolio was heavily diminished, my job was a daily soul crushing grind, and I worked hard over many years to ditch the rat race on my terms. The new terms then weren’t great, but I was still very blessed. 

  • A life that prioritizes family.
  • I still had an income source. 
  • Portfolio to replan upon and build on.
  • Zero debt.
  • Known lifestyle budget, roof over my head, and food on the table.
  • Still able to influence my own destiny.
Keep my mouth shut – 

I decided that my best course of action was not to show any of my cards. Keep quiet and leverage income, working conditions, and departure timeline to my advantage. The goal was to retire young for more freedom and purpose on my terms regardless of the economic challenges. I did delay my early retirement by a year and a few months. 

Restructure finances – 

It was obvious that selling beaten down assets to fund retirement in the near term wasn’t going to be smart. Although I still invested in my stock and bond allocation to take advantage of cheap prices, I reduced the percentage and increased cash reserve allocations for short-term retirement funding needs. We also refinanced our modest mortgage to a slightly lower interest rate for the balance owed but re-extended out for 30 years to reduce monthly payment obligations. The thought was we could leverage lower monthly outpay obligations now to assist in increasing cash reserves. Then we would voluntarily increase mortgage payments when economic conditions improved.

Delay retirement, not cancel –

Most importantly to tame my disappointment, I was able to delay and not cancel my early retirement plans. I didn’t know when, but holding my future in my hands allowed me to mentally accept the conditions. As I became more comfortable with my new plan’s progress, I used my growing confidence to leverage concessions and pay increases from my employer during a time when they were used to brutally acting like they held all the cards.

Position For Retirement On A Fixed Income That’s Portfolio Fed

Now that we are again in a new economically challenging environment that appears to also be crushing early retirement dreams for some people, the actions taken when I retired early over a decade ago have smoothed some of the financial pain of today. However, it still needs work to fine-tune.

Get where I need to be – 

We use a portfolio bucket strategy to fund our early retirement. Because the memory of the recession burned deeply in my mind, I’ve always maintained a higher cash and near-cash bucket than most people to fund short-term retirement income needs. However, I did allow myself to reduce it in the past couple of years as we grew older and are closing in on Social Security and Medicare age. At this time we have redirected all dividends and interest to cash instead of a portion being used to reinvest. The goal is to avoid asset depletion until market conditions become more favorable or certain. That and fully bridge the gap to when we start collecting Social Security and when we can ditch my costly health insurance plan for Medicare.

Inflation – 

This has been an interesting mind warp. We were young parents during the go-go inflation of the early 80s. A lot of what we learned trying to save money and survive on a low income frugal budget then has come back easily today. Coupons, sales, discounts, purposeful essential spending, upgrading to a smart thermostat, decreased water heater temp, shorter showers, DIY repairs, frugal cell service, shopping used items at places like Goodwill, driving less-bicycle and walking more, etc. It all adds up and makes a difference. I actually enjoy saving money. 

Sell unneeded stuff –

I always find it amazing that some of what we have and don’t use is needed and valued by someone else. I have been using Craigslist to sell small things and although it isn’t a big cash influx, it does fill a gas tank now and then. 

Increase lifestyle funding – 

Our monthly IRA distributions have followed a modified version of the 4% rule. That rule allows for inflation adjustments, but in this 7% to 8% inflationary environment, does the market diminished portfolio agree? We did slightly bump up distribution amounts but less than the going inflation rate. The difference is made up in spending reductions and emergency fund cash savings when necessary. 

Earn income –

I’ve always believed that retirement is the absence of needing to work, not the absence of working. As of now, there is no job I am interested in learning or doing, unlike there was in my earlier years of retirement. I was a little too successful in working through my bucket list back then. What I do today is keep an open mind and ear. One never knows when a perfect opportunity will present itself. It takes being open to the idea so that I can see it when it comes.  

Realize we’re not alone, pay it forward and offer unwanted things for free – 

Most people are experiencing the pain of inflation and budget strain. In my search for things to sell-off I’ve also found things I just need or want gone and offer it as free. I see it as a trade. If you want or need it, come and get it at no cost. I in turn won’t have to pay for it to be hauled away or dumped. I also price my things to sell at a low cost. I’d rather sell something quickly to someone who can use it than to drag it out over a longer period of time or get into a trolling haggle. Everyone is looking for a deal to get by.  

Figuring our way through these economic headwinds isn’t easy, but nothing worthwhile ever is.

I don’t know when inflation will relax or when the market finds its bottom and stages a reality based comeback. I do know that it will happen at some point. Retirement means being in charge of our own finances and proactively doing what is necessary. 

My task is to stay calm and position myself the best I can to continue funding my early retirement freedom into and beyond our full blown old-fart retirement. This is all just another hiccup in the financial independence journey. The key for us is to maintain a lifestyle that is still enjoyable during this choppy economical episode of time.

Inflation and a dropping investment market is a challenging time. But completely crushing early retirement dreams doesn’t have to be accepted without a fight. We do have to understand our own risk tolerance and make decisions based on what we believe is the right move for us. The last thing someone should do is enter into retirement feeling they may have made a big mistake. 

The goal is to assess the current situation, make necessary adjustments, and move forward confident in our decisions. Then keeping an eye on conditions that necessitate path corrections going forward.

Best Financial Advice for Recent College Grads in 2022

Financial Plan

The article was contributed to Leisure Freak by freelance writer Tracie Johnson. 

For most people who’ve done it before, starting life after college is cited as being one of the most overwhelming times in their adult life. While some get out of college and into a laid-out financial plan for them by their family, most people have to get out on their own and just figure it out. It’s, however, not all doom and gloom, thanks to the wealth of both formal and informal information available on the internet about starting.

Best Financial Advice for Recent College Grads in 2022

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Pre-Graduation Financial Tips

As if starting life after college wasn’t already difficult enough, you now have to do it while in the middle of an ongoing pandemic and worrying global tensions. Before you finalize your studies and officially head out into the world, here are some tips you could embrace to help you set up a soft landing for yourself once you graduate.

1. Embrace Budgeting

Even from the allowances afforded to you while in college, it’s never too early for you to embrace a budgeting culture. Especially in these social media times where you’d never run out of influences on ways you could spend your money, living on a budget can at times be your saving grace from living in debt.

2. Plan for Your Retirement

Just as it’s never too early to live within a budget, likewise, it’s never too early to start planning for your retirement. Some of the options to work on your long-term financial security include saving exclusively for your retirement and investing in long-term investments like life insurance and real estate.

3. Aim for Good Credit

As you get out into your post-college life, a bad credit score will quite often have the effect of denying you opportunities for financial development. Though it may not come easy, clearing your debts, including your student loan, should be top of your priority list as you head out into the world.

4. Prioritize Saving

With every little income that comes your way, normalize setting aside percentages of the same into different savings accounts. You can set aside some money for your rainy-day fund, your retirement, as well as short-term expenses that would require cumulative storage of cash.

Post-Graduation Financial Advice for Recent Graduates

Once the hype around graduation dies down, you’re left in a state where you have to, all alone, contend with the uncertainty that is your post-college life. Here are some tips to ensure that your finances are in check once you step out of college and into the real world.

1. Don’t Buy that New Car

Though getting that new car may seem like a priority when you have the cash ready, more often than not, you’ll probably come to regret this decision a few months down the line. Instead of getting that expensive new car and exhausting all your savings, you should consider checking out cars for sale online for offers on other affordable options.

2. Moving Back to Your Parents Isn’t That Bad

You should probably consider moving back into your parent’s house to cut down on your living expenses at the cost of losing some of the freedom you had while living alone. If this is not an option, getting a roommate is another approach that can help you ensure you cut down on costs.

3. Strive To Be Financially Literate

While there are formal financial courses in college, you may have had other ideas about what you wanted to study. This notwithstanding, you should make an effort to make yourself financially literate through online or physical classes.

4. Take Risks on Available Investment Opportunities

While you’re young and not tied down by too many responsibilities, you have the luxury to take risks in financial investments. Though there’s always the risk of some of your investments not going as planned, you should always take this as a step towards learning what works and what doesn’t for you.

Out of College and Into the World

While getting out into the world after college may be a scary affair, you should take comfort in that many have come before you, at times with more unfavorable odds. You should try to reach out to other people and learn from their experiences as you go about charting your course. Just because it won’t be easy, it doesn’t mean you should give up on trying altogether.

 

While you’re young, use the internet and try to learn as much as you can and open yourself up to new experiences. Make the most of your finances by trying out different investment opportunities even as you pay your bills.

 

Thank you Tracie Johnson for sharing these timely tips as many people are ready to move into their well earned adventure of post-college life.

Author bio:

Best Financial Advice for Recent College GradsTracie Johnson is a New Jersey native and an alum of Penn State University. Tracie is passionate about writing, reading, and living a healthy lifestyle. She feels happiest when around a campfire surrounded by friends, family, and her Dachshund named Rufus.