Running out of money is not on most people’s bucket list, yet most worry about it. A recent study found that 80% of the interviewees feared running out of money. In another study, people said they were more afraid of running out of money than dying.
And it is a reality for many. Studies show that up to 40% of people rely entirely on Social Security for their retirement income.
The research my peers and I have done show it is higher.
In addition, of those living in poverty over age 65, almost 75% are women. Many of these women were not broke or poor while married or working.
You will love today’s episode if you want to avoid running out of money.
Summary: Wealth Inside and Out® Podcast – “80% Fear of Running Out Of Money, Do You?”
Overview of what you will learn:
>> (3:43) How to stop overspending
>> (8:08) Where you need to focus your attention and energy
>> (10:29) What to avoid when investing
>> (12:30) Additional tips to create a secure financial future you love
Welcome
Hi, my name is Annette Bau (bah oo).
I’m a Certified Financial Planner™ and founder of The Millionaire Insider®.
This is the Wealth Inside and Out® Podcast.
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3 Indicators You Are at Risk of Running Out of Money
1. Overspending
Overspending is a classic indicator that your expenses are exceeding your income.
If you or your partner consistently spend more than you earn, your savings can quickly deplete and lead to financial strain. Or you pay your expenses with credit cards and are accumulating debt.
Steps to Stop Overspending
Seek emotional support
Most experts agree that overindulgent behaviors fill an emotional need and produce the feel-good chemical we crave. Examples include overdrinking, overeating, over-sexing, or overspending, which all create a dopamine hit.
Healing emotional wounds, such as the belief that we are not enough, requires that we embody our emotions and become comfortable with discomfort.
When you find yourself overspending or overeating, stop and feel the emotion instead. Do not do anything to distract yourself, as this is critical to training your subconscious mind.
Initially, this will be difficult for most people, but as you train your primal brain, it gets easier. It also trains your brain to handle other overindulgences.
Determine your income
Include any money, gifts, or cash you receive throughout the year.
Track your expenses
Creating a spending plan will help you identify where you are spending your money, determine where you are overspending, and learn how to curb spending.
2. You Don’t Know the Facts
The bottom line is you really don’t know what is happening with your finances.
You delegate and abdicate your finances to (fill in the blank) your partner, spouse, financial advisor, CPA, etc.
This is common with busy, successful people. Unfortunately, they often find out the outcome of abdication too late.
At a convention for top entrepreneurs, three speakers shared how they almost had to file for bankruptcy because an employee was stealing money.
The person paying payroll taxes was pocketing the money instead of paying the IRS. When they finally discovered the theft, they had to repay tens of thousands of dollars in taxes and penalties. One man shared that he had to repay over $300,000.
The first step to solving this problem is to create a financial plan and commit one hour a week to implementing it.
While creating a financial, investment, retirement, and estate plan can seem overwhelming, one hour a week is doable. It also is a key to ensuring you don’t end up broke in retirement.
3. Not Accumulating Enough Money
One of the most critical steps to avoiding running out of money is to accumulate wealth, including stocks, bonds, CDs, real estate, etc.
Accumulating wealth requires that you save and invest money consistently.
Building wealth requires spending less than you make so you can save and invest the excess money. Over time, your money will accumulate, compound interest will kick in, and wealth will grow.
Another reason people aren’t accumulating wealth is that they invest too conservatively or too aggressively.
When we are too conservative, we do not take on enough risk, and therefore, our assets do not grow at the level required to achieve our financial goals. Investing in low-risk, low-return assets that do not keep pace with inflation often requires you to save more money or retire without enough money.
Always consult a qualified advisor to assess your risk tolerance and goals before beginning any investment plan.
When you invest too aggressively, you risk losing money if the market drops.
Another common problem is that if you don’t accumulate enough money, it becomes difficult, if not impossible, to create guaranteed income streams.
One of the best strategies to avoid running out of money is to purchase a guaranteed income, vehicle, the most common is an annuity.
You give an insurance company a lump sum, and they guarantee to provide you with an income stream for life. You can also add a guaranteed period, such as your life, and a minimum of 10 or 20 years.
If you live longer than the guaranteed period, your heirs do not get any money. If you die before the term, e.g., 15 years, and you have a Life plus 20-year annuity, your heirs will get the balance for five years.
Additional Tips to Avoid Running Out of Money
Avoid living paycheck to paycheck
One of the most common signs of financial problems is overspending. Living paycheck to paycheck and being unable to save or invest money is never a good sign.
Pay your bills on time
Paying bills on time is another important indicator of financial health.
When you consistently pay your bills on time, you demonstrate responsible financial management and avoid late fees, penalties, and interest.
Timely bill payments help maintain a good credit score.
A good credit score determines the amount of interest you will pay on other loans.
Examples include:
- Loans
- Credit cards
- Mortgages
If you’re struggling to pay bills on time, get help.
Create and follow a budget
This should include your living expenses, including housing, utilities, insurance, etc.
Many people find that an online app helps them follow a budget.
Increase your income
Whether you get a raise or a side hustle, prioritize earning and saving money.
Take a list when shopping
Always make a list when shopping at the grocery store and stick to it.
Create an emergency fund
Set aside three to 12 months of cash for unexpected expenses.
Review your spending habits
Continue to monitor and review your budget and spending habits.
Invest any extra money you receive
When you receive money from any source, instead of spending it, save it.
Set up an automatic transfer
Studies show that automating transfers increases your odds of saving money.
Start by automatically transferring money from your bank account into your savings or investment fund.
Make saving money a priority
When we create a budget and prioritize investing and saving, we reduce our odds of running out of money.
Practice mindfulness, deep breathing, and other healthy options to avoid overindulgent behaviors
Practices that help calm our primal (toddler or child brain) are helpful.
They help us get and stay in the driver’s seat of our lives and not react to distractions.
Conclusion – “What To Do To Avoid Running Out Of Money”
Today, we cover three reasons people run out of money. From overspending to abdicating finances to accumulating wealth, all increase your odds of running out of money.
The insight gained in this podcast will provide you with the necessary action steps to create a secure financial future and a retirement you love.
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