8 Spending Habits That Keep You Poor | Retirement Goals

are you making a million dollar early retirement mistake we're john and bev and we are the retirement travelers in today's video i'm gonna go over eight common spending mistakes that people make that absolutely crush the retirement savings now i kind of have to hang my head in shame because we are kind of experts in this category because we have made every one of these and we don't want the same for you okay fortunately though we were able to nip it in the bud and we didn't prolong the pain of how much money we were wasting uh by doing some of these mistakes so in each one of these today what we're going to do is try to quantify how much these mistakes can impact your retirement savings mistake number one is buying expensive toys and some examples of this might be an rv a boat a four-wheeler jet ski snowmobiles those types of things that are pretty large expensive toys now i'm not saying every one of these is a bad thing you know i know people that love to fish they have a bass boat and they go out multiple times a week that's really not what i'm talking about okay i'm also no people that are retired and have an rv heck we did that and they go around the country full time utilize their rv every day that's not what i'm talking about i'm talking about the kind of mistake we made okay it is buying an expensive toy like a boat and and really only using it a few times a year and i know that i'm not the only story out there like that because you know one of the one of the things i always hear about boats is the happiest day is when you buy one and the next happiest day is when you sell one well let me tell you our story we bought a boat about 10 years ago nice ski boat and we were living on a river and we thought we're going to use this thing all the time well to make a long painful story short 10 years later after paying taxes insurance maintenance lugging it around to four different locations and using it you know a handful of times each year we finally sold the boat and it pretty much cost us a fortune to do that and i know other people that have bought snowmobiles and jet skis and other toys it always sounds like a great idea when you buy it but in the long run all these costs add up so in this example let's say you buy a forty thousand dollar boat or other expensive toy and you keep it for ten years and let's make an assumption that you spend four thousand dollars a year on maintenance and taxes and and upkeep of of this equipment okay if you would have taken that forty thousand dollars and invested it and then added in that four thousand dollars a year in ten years at a six percent long-term stock market return you would have had hundred and fifty thousand dollars so the next time you think about buying that expensive toy think about what your options are and how that could impact your savings the second big mistake is buying too much house now as a retiree looking back guess what hindsight is always 20 20. but buying bigger houses or buying smaller houses in our case could have changed our whole trajectory for retirement you know you don't realize it at the time you know this is where a lifestyle creep really starts kicking in you you get a promotion you move you have kids you justify all the reasons why you need that little bit bigger house with an extra room and an extra slot in the garage in a little nicer neighborhood with a little better view and you justify why you can why you can afford this well that lifestyle creep can really really add up and if we had it to do over guess what we would not have done it we realized now that we did not need the bigger houses and you know it was it was interesting a couple years ago we took a a long rv trip around the country and we were living in 250 000 square foot i mean not 250 000. 250 square feet in a in an airstream and we had lived in good size homes our entire life and we thought what's it going to be like living in 250 square feet guess what we had a great time and no big issues so we kind of learned from that experience uh that we didn't need that and i wish we would have had some of that learning you know maybe 20 years earlier so you know if you look at the size of your home let's say you had a 25 years of living in a home bigger than you needed okay i'm just going to do an estimate of about 500 a month might cover extra furnishings extra taxes extra maintenance extra insurance um it's very easy extra um you know interest from your mortgage all those things add up if that's an extra 500 a month over 25 years that could add up to around 330 000 over 25 years that's a big chunk of retirement savings the third item i'm going to call all the little things why because all the little things add up to the big things and what i'm talking about is the you know the starbucks coffee the stop at the convenience store you know going to lunch rather than taking your lunch impulse buys at the grocery store by not having a list now we've made all of these you know some of the things that we've done when we go to a gas station oh let's let's grab a coke and some chips or something you know we we pay extra for that you know when you take your kids out to a restaurant and get cokes wow that adds up like we have seven of us in our family with five kids that'd be another fifteen or twenty dollars just with cokes we finally said kids no more cokes it's water so it would have to be a celebration to get a coke so you get the point it's all the little things that add up and just spending 25 a week or saving 25 dollars a week if you invested that over the course of your lifetime rather than spending it on junk pretty much uh at a six percent stock market return that's a hundred thousand dollars so think about that twenty five dollars a week invested at six percent for 30 years is a hundred thousand dollars the fourth mistake i'll call junior is still on the payroll and what i mean by that is are you still funding your adult children you know well beyond high school and college and this is something that i know is a touchy subject with people but you know we just strongly believe you you want to try to raise your kids to be independent and know about money because if they're always dependent on you you know where where does it stop you know is it do you do you buy them cars in high school do you help them with college do you go you know help them with grad school do you buy them the first car you know do you keep them when they come back after college you know where where does it end and when do they become independent and so in this example i just want to give you a few examples and you know let's say that um you you buy them a car or help them with a car maybe that's twenty thousand dollars uh maybe their wedding um they have an extravagant wedding and and you get the extra bill of ten thousand dollars um perhaps they go to grad school and you help them out with another 20 000 that's 50 000 right there say you have a couple kids boom that's another 100 000 that you could have in your retirement savings number five is the second home money pit and i have to tell you this is the most painful one for us we had this dream going into retirement that we were going to be snowbirds i mean it just sounds like a great thing i'm a snowbird i go live in the in the warm in the winter it sounds like such a wonderful thing until you realize you have two homes and when we had two homes what we were what we found basically is we had two of everything and you know it really snowballed you were we were paying two hoa fees we were paying utilities at both places we were paying to keep up lawns um going back and forth it's like well maybe we should buy an extra set of bicycles because they're kind of a pain to lug back and forth all those things we did not realize when we thought about this dream of being snowbirds and having a home in kentucky in a home in florida finally we realized this is just not for us you know we did it for a few years we learned some painful lessons and finally we we sold the house in kentucky and got down to one and our experience was that you could probably spend about twelve thousand dollars a year believe it or not it was a thousand dollars a month uh extra cost when you add in taxes insurance maintenance upkeep hoas furnishings travel it's pretty bad and that can lead to well over three hundred thousand dollars if you did that for 15 years believe me it's painful number six is paying state taxes now you're probably saying to yourself i live in a state where they require state income taxes what do i do well there are nine states that do not have to pay state income tax now we lived most of our adult life in indiana where it's i'd say it's a medium range uh state income tax when we moved to new york ouch new york is very high with state income taxes a few years after that we moved to tennessee is like wow you know we went from like 10 to 0 it was nice now if you have the ability to work remotely or move to a state that is a low tax state or no income tax state just think about how much you could save if you took that money rather than paying the state and invested it in the stock market uh good things might happen so let's just say you averaged an eighty 80 000 salary and you could reduce your state taxes by 4 percent over 30 years that would be 250 000 you would have in your retirement savings after 30 years would you rather have it there or paying a state the number seven mistake is making bad choices with cars now i recently read a statistic that most people will own eight to ten cars throughout their entire lifetime now this gives you eight to ten chances to make good decisions you know do you buy a new car versus a used car how long do you keep your car do you maintain it well all of those things can add up to a lot financially now i'll show you a story when our oldest daughter met her future fiance he picked her up in a toyota camry that had about 300 000 miles now he could afford more but he didn't he just took care of his car and ran it for a long time he scored big points with us and we knew she had a keeper if he was willing to do that because he knew that not spending a lot of money on cars could have a big impact someday so if you look at the difference between overspending on cars example buying old or used versus new the averages are around 250 to 300 a month if you add that up over the course of your lifetime again that's about two hundred and fifty thousand dollars more that you could have in your retirement savings the eighth big mistake is carrying debt into your fifties now it's probably impacted by these first seven mistakes uh the things that you do with your spending probably impacts your debt into your al all the way into your 50s the average american has about a hundred thousand dollars of consumer debt and about five thousand dollars in credit card debt which is a very high interest rate these these are killers for being able to retire our belief is that if you can be debt free by age 45 and that includes a mortgage and everything that you can spend those final working years to really save for retirement and prepare yourself to go into retirement currently over half of all retirees enter retirement with debt and that is just a bad position to start off your golden years is owing debt so if you can get debt free by age 45 that's fantastic now for the grand total if you add up all these mistakes it comes out to about 1.5 million dollars using fairly conservative estimate here now even if you think i'm a bit high on my estimate and we reduce it say by 20 on every one it's still over a million dollars that impacts your retirement savings and if you remember back to some of my other videos a million dollar in savings using a 20 rule of 25 is about forty thousand dollars of income each year in retirement so this is a big deal if you can delay some gratification of some of these spending throughout your life you can have a much better retirement life so in our current retirement life we have no boat or other expensive toys we have no home no second home no cars no state income taxes no credit card debt no debt of any kind and our kids are independent and guess what we are having the time of our life traveling the world we're currently in the balkans and it is simply amazing so if you want to follow along and you like this kind of content be sure to hit subscribe you know this is kind of our side hustle and it really helps us out and be sure to leave a comment if you think we missed something or you have something to add about one of the mistakes that i mentioned we'd love to hear from you and it helps our other viewers so we'll see you next week be sure to hit subscribe and follow along on our retirement journey around the world

Channel: Retirement Travelers

Views: 42,676

Keywords: How not to retire early, Money habits to break, retire now, retire early and travel, retirement goals, Retirement habits, retirement spending, retirement savings goals, early retirement goals, retirement advice, money habits, habits that keep you from retiring, money habits that keep you from retiring, money goals, how to stop spending your retirement, spending habits, spending habits that keep you poor, retirement spending goals, retirement saving goals

Id: oe9PQQwfv9w

Length: 14min 33sec (873 seconds)

Published: Mon Sep 19 2022