Where Does Your Hard-Earned Money Go?

Most people don’t find budgeting exactly fun. It is, however, critical to expense control and your retirement planning. But where to begin?

We started with an analysis of our spending habits. Ron downloaded months-worth of spending data from our bank’s web site and American Express. He then grouped like expenses together and determined what category names to put on the groupings. Then we started tracking our spending in those categories. You need to do this too, as a precursor to establishing your budget. I guarantee you will become more aware of where your money is going – and in the process will make some surprising discoveries.

Although some of your category buckets will be the same as ours, you will have others we don’t have, and/or may want to track at a lower level of granularity. The categories we use are listed below in alpha order with a little on what they include, where necessary:

· Allowance – Walking around pocket money.
· Books/Magazines
· Car Insurance
· Car/Transportation – Gas, maintenance, and for us city-folk, public transportation.
· Charity – Including church donation or tithe.
· Clothes – Plus shoes and accessories.
· Dry Cleaning
· Entertainment – Dining out, movies, concerts, theater, clubbing.
· Food – Groceries (does not include dining out).
· Gifts
· Grooming – Haircuts, coloring, manicures, pedicures.
· Gym Membership – May also include exercise and dance classes.
· Health Care
· House Cleaning
· Household Goods
· Housing – Mortgage principle & interest or rent, property tax, parking, homeowner or renters insurance, association assessment, home repairs.
· Internet
· Miscellaneous – There’s always something that defies categorization.
· Savings – Money that comes out of your pay and goes directly into a bank account, a 401K, investments, or deferred compensation.
· Telephone – Land line, cell phone (include cell internet service).
· Travel/Vacation – Air travel, hotel, meals, other spending on vacation.
· TV – Cable, DirecTV.
· Utilities – Water, electric, gas, trash collection (be sure you know whether any of these are already included in association assessment fees).
· Wine – Wine and other alcoholic beverages could be included with groceries, but we like to track it separately.

Again, these are our categories and may not work for you. You may have child or adult care, tuition, alimony, debt repayment (loans or credit cards), lawn care, legal fees, or other expenses pertinent to your life.

Start evaluating your spending today. It’s a necessary step before establishing your pre-retirement budget, which will be next week’s subject.

Planning for Your Dreams

Last night Ron and I enjoyed the sunset (and the distant chaos of rush hour traffic) from a serene rooftop lounge in Chicago, and toasted each other with, “We’re living the dream.” Our dream is the culmination of years of planning and decision-making. We know how we reached our goals, and are happy to share some ideas with you.

The first step in any plan for the future is to get a handle on what your expenses and spending patterns are today. Use this as the basis for establishing a realistic budget. Start by tracking spending against a budget to create more awareness about where your money is going.

You can document and analyze your ongoing expenditures with an Excel spreadsheet – or a piece of paper for that matter. To some extent, HOW you pay can ease your tracking efforts. If you deal mostly in cash, you need to save receipts for review. Our preferred methods of payment are a bank debit card and American Express. Both give us detailed online records that we use to categorize purchases for comparison to the budget numbers. (In addition, with the American Express Rewards program we accrue points that are redeemable for gift cards.)

Once you are knowledgeable about your spending habits, you may want to make some adjustments to pull things into line with your saving goals. Looking objectively at expenses in a consolidated form, you may become aware of untapped opportunities to be thrifty and save more for your future.

Below are some examples of “non-essentials” that eat up discretionary income. No judgment intended – just food for thought:

· $25 a week to have a landscaping service = $100 per month
· Internet access on your cell phone = $40 per month
· Premium movie channels on cable that you rarely watch = $30 per month

I’m not suggesting that you sacrifice quality of life today. Just make deliberate choices, weighing your needs today with your dreams for the future. Your philosophies may well be different than ours. None of us truly know what the future will bring, and should live our lives to the fullest every day. (Being a victim of cancer in 2002 changed my perspective on that for good!) We saved aggressively to try to ensure that our retired life could be full and enjoyable, but certainly never felt deprived.

Next week, I will begin a series on the specifics of how we built our plan for retirement. Ron masterminded our plan, so I will be interviewing him to document the approach and some tips you may be able to use.

A Little Self-Imposed Discipline

There’s not much enforced structure in my life these days. This fact alone relieves a lot of the stress we suffered during our working years. But, for me, a complete lack of structure can lead to unproductive and unsatisfying days that just slip away. I’m not comfortable with just letting these precious days get away from me.

Now I create my own laid-back structure. I think about what I need or want to do during the week and loosely plan what to do and when. Today, I know I need to do some laundry and get to the grocery store. For fun and exercise, we’ll walk to the driving range and swing at a bucket-load of golf balls.

Ron is cool with this loose structure, and is thriving in it. I have found that I need to create some actual deadlines for myself, to introduce a little more discipline and productivity. It’s a rule that the bed must be made every day before I get in the shower. And I have to shower and dress by a certain time of the day. (I’m not going to tell you what time, or you will hate me a little.)

This blog, “Retired Early – The Reality”, is published every Thursday morning. It helps me make sure that I continue to ponder how to define my new life. Somehow, putting my thoughts into words for others to read helps me appreciate everything more. I don’t want to take anything for granted, because I know that the living situation we have today is extraordinary – for us. Enough friends have asked me what we do now and how we got to this point of freedom that I felt it was worth trying to explain it.

Then Haropulos Bailey Consulting started as a little seed of an idea. It seemed like a shame to “waste” all the business experience we have. I’m fortunate to have time to build our offering slowly. I started another (professional) blog, which I publish on Monday mornings, at http://habaconsulting.blogspot.com. The blog reflects my business philosophies. It may or may not result in generation of any business, but I know it’s important to establishing an online presence and a brand identity.

Every day, I spend some time networking on Facebook and LinkedIn. The disciplined aspect is the need to contribute something – that’s how you reap pleasure back from Facebook. My participation on LinkedIn resulted in my first paid consulting work. By actively responding to open Questions in my areas of expertise, I have made new Connections that have enhanced my online experience. Again, the more you give, the more you seem to get back in return.

Being retired doesn’t mean being disengaged. A little personal discipline goes a long way in setting you up to be proud of your accomplishments – a feeling we all need for our self-esteem.

A Virtual Leap

Back in the middle of a brutal Chicago winter, I spent a good amount of time indoors and online for entertainment. Christy, one of my good friends from Memphis urged me to join Facebook to stay better connected with my friends spread far and wide. I was hesitant, but agreed to try it out.

Once I set up a profile for myself and started sending and receiving invitations, it was like being swept into a swift current of a river I hadn’t even known existed! Having moved four times since graduating college and joining the working world, I regretted losing track of some special friends. Suddenly, I was finding them and they were finding me through Facebook. Now I’m connected to 110 friends, which seems like a lot to me!

I’m delighted to have made FB connections with remote family members, some of whom with which we normally only exchanged Christmas cards. My younger sister, Althea, and I use the chat function to catch up with each other. Cousin Johnna posts photos of her girls Claire and Molly, and I plan to see them all (and finally meet their daddy) in Maine in September. I found Lauren Haropulos, a young cousin twice removed, that I did not know. She is a high school student in New York City. (I don’t understand a lot of what she posts, which is in texting lingo – but that’s cool.) Her school was the one in the news about the Swine Flu breakout, and her postings were interesting during that time. (Students at St Francis Prep were calling the school “Swine Prep”.)

I’m grateful to have reconnected with so many dear friends. Kathy, an elementary school friend, sent me an invitation (and sent me digging through boxes to find old class photos) – what a delightful surprise! Emily, a dear friend from Northwestern, is a treasure! Her humor and sweetness bring me a unique joy I had missed since we lost track of each other years ago. I hope to get to Seattle to see her in person. My lifelong friend, Debi and her partner Tim are building a new house in Maryland. She sent a link to a web site where I can see the progress on construction of their dream home. I get to see vacation photos from friends like Fernando & Michelle and Kevin & Jill that I might not otherwise have seen. There are so many more examples of the pleasure social networking has provided to me. It was well worth the virtual leap.

Is there a down side to this trend to online friendship? Not for me. Granted, I have “ignored” some friend requests from a few people who are only acquaintances or business associates, but not friends. (Sorry.) And I have friended a few people who post TMI, so I have hidden their posts. I have only unfriended one person, who shall remain nameless. It’s manageable.

So if you can’t get enough of your friends and family and/or have lost track of some good friends – try Facebook. It’s a perfect example of what’s really good about the internet.

Marriage to Retirement - Another Fork in the Road

When I got married, it was the happiest time of my life. At the same time, combining two independent lives was full of adjustments. It involved moving, making decisions about furniture (sorry, but his rented stuff was out of there!), reorganizing storage, plus the most important personal adjustments. We had to become used to being together more, how we spent our leisure time, negotiating meals, what to watch on TV, who slept on which side of the bed...you get my drift. It was all new and exciting; but change is change, and it was also a little stressful.

My husband pointed out to me yesterday that there are significant parallels between the transition into marriage and the transition into retirement. For us, it again involved moving, selling and buying furniture, organizing storage, and other logistical challenges. Most important, we were redefining our combined lifestyle. Once again, we entered a new and exciting part of our lives together.

When some couples retire, they find that being together most of the time is a huge adjustment. Over the course of a marriage or partnership, you find a natural level of togetherness to which you become accustomed, based on your normal routines. Retirement throws those norms out the window, and you develop new habits that work for you as a couple.

For me and Ron, this has been a smooth transition. We never had children, so have always spent most of our time alone - together. For the last 12 years of our careers, we worked for the same company. We collaborated on several large projects and often took work home, continuing to discuss our professional challenges during the evening or over the weekend. Many can't imagine how this worked; but it was part of the closeness of our marriage, and we couldn't imagine it any other way.

If you aren't yet retired, be sure to talk with your partner about your hopes, dreams, wishes, and anxieties. If one of you yearns for a cabin in the woods and serenity, and the other wants a condo in the city and the high life - it takes time to work it out and come up with a compromise.

Enjoy the planning and the adjustment for the new and exciting retirement phase of your life. Life is truly a journey and, when you take a fork in the road, hopefully there is someone there to come along, hold your hand, and enjoy the view.

Uh Oh... Caught the Golf Bug

This is such a retirement cliché! I am now hooked on golf. I almost never played before, but now I browse the weather forecast looking for nice days to get to the golf course. If there is only a small window of clear weather, then I can at least sneak in a trip to the driving range. We had a rainy spring in Chicago, but I already have a golfer’s tan. How did this happen?

My dad was a dedicated golfer. He played every weekend, sometimes on both Saturday and Sunday. It was, in part, a social event for him, as he was part of a regular foursome. They would golf early, and have brunch at the club before heading home. When we kids were little, I remember Dad taking us to the driving range as a special treat.

You can’t become a competent golfer by playing once or twice a year. That’s just impossible. But now… We have more time, and we can walk to a 9-hole golf course on the lake. I knew I was committed to trying when Ron surprised me with a beautiful set of clubs two years ago.

It’s hard to have a bad outing when the weather is beautiful, the course is green and fresh, the lake is sparkling and the birds are tweeting. But there are only so many mis-hits you can suffer before beginning to get frustrated. Golf is a muscle memory sport – so the more you swing badly, the less opportunity your body has to experience how to do it right. The worse you do, the more strange things you try to fix what’s wrong. Generally, it just worsens. The golf gods always let you hit just enough really good shots, to keep your hope alive – just to be dashed again and again.

Failure drove me to a golf lesson when we were in Nevada last month. Hallelujah! Mary Ochs, “my” LPGA pro teacher, was fabulous. In an hour lesson (with another freebie 15 minutes), she pinpointed my major issues and coached me to correct them. I hit some balls that made me literally shout with joy! This is the pleasure of golf. It’s so challenging that when you finally do something right – it’s totally exhilarating. I’m still at the point where each time I address the ball, I have a whole checklist I have to work (elbows in, knees bent, butt out, back straight, head down, weight on balls of feet, eyes on ball, relax grip, twist hips, full follow through, etc.). In time, these should come naturally with less thought.

Ron and I still play “best ball” on the course (we both play from the spot of the best shot between the two of us), to keep the game moving and be courteous to the more experienced golfers behind us. Now, some of the best balls are mine! Sometimes I am hitting glorious drives out of the tee box, straight down the fairway. My putting is so-so, but shows promise. I get tired after nine holes (still a lot of swinging to little avail), so a half round is perfect.

I’ve got the golf bug something bad. Gotta go. I need to book a tee time.

From Suburban to Urban Living

Ron and I lived in suburbia throughout our life together (in Dallas, Las Vegas, and Memphis), before moving to Chicago. So we really weren’t sure how much of an adjustment to our lifestyle would be necessary when we moved into a condo in the city. After a year here, we have a handle on it.

The biggest surprise, and a pleasant one, has been how little we use our car. On average, we use the car about twice a month. Back in January, when the weather was really bad, we didn’t use it car all month! (In fact, I think there was a week we didn’t even venture out of the house!) The limited use of the car has been great, considering the cost of fuel. Now we are struggling with how to think about the rising cost of parking, and the cost of insurance. Do we need a car at all? Should we find remote parking that’s less convenient and much less expensive? Still thinking about this.

It's surprisingly quiet in our urban home. Our building was built in the 20’s, and is as solid as a fortress. In addition, the one block street we live on is all residential. It gets a little noisy when classes begin and end at the two schools near us – but that doesn’t last for long. Otherwise, we are rarely disturbed. We don’t notice traffic noise at night at all.

We walk much more here than in suburbia. We used to take leisurely walks in our Memphis neighborhood, but now we walk with purpose to stores, restaurants, the library, the el station, the golf course, and to and through the park…almost everywhere. This immediately resulted in some natural weight loss, even before we changed our eating habits last fall. When we moved here, I struggled with walking 2 miles. Now I can walk 5 miles in a day without popping the Advil PM before I go to bed.

I was worried that Ron would miss puttering in his yard, but that has proven not to be an issue. Our building has a small front yard, and we are on the landscape committee. We’re gearing up to make improvements that will require some sweat equity, and I think that will be satisfying for both of us.

We’ve become more eco-friendly in the city. We have always recycled, but our consciousness has now extended to our purchases, our use of public transportation, and a general desire to live a more sustainable lifestyle. This has been an interesting side effect of urban living.

One final observation… I believe that we have become more outgoing in our contact with neighbors, service providers, and casual acquaintances. This may be more as a result of a reduction in stress and a slower pace of life than it is the suburban/urban thing. We have found our new contacts in Yankee-land to be surprisingly polite, helpful, and friendly. It’s easy to respond in kind.