Explore Our
“Off The Wall” Blog
Unique, straight-forward, unfiltered opinion on topics of concern for individuals with newfound wealth.
Secure a Survival Fund for Retirement
Once the steady salary stops and retirement begins it becomes crucial to establish a survival fund to cover your expenses.
Bill Gates has a fortune estimated at $56 billion, according to Forbes 2011 Billionaires’ List. While I’m sure he has a very comfortable lifestyle, every day he needs food, clothing, shelter, and healthcare. These are fundamental needs shared by everyone, and they are non-negotiable―even for the richest people in the world.
Throughout our lives, we live in two interrelated financial modes: survival and lifestyle. As Private Wealth Advisors, when we talk about the survival mode, we don’t mean living in the wilderness and hunting for food every day. Survival mode refers to mandatory expenses that must be met without exception, regardless of market conditions. Typically, these expenses include your grocery bill, mortgage, taxes, utilities, health insurance, and clothing. And with inflation, many of these expenses may increase over time.
In your working life, your salary pays for survival expenses. When there is a surplus it funds your lifestyle expenses. Lifestyle expenses are enjoyable, fun, and negotiable. They include extras such as dining out, purchasing a new car every couple of years, vacations and travel, entertainment, a second home, and designer clothes. Keep in mind that survival and lifestyle expenses are relative, and can mean different things to people depending on their income and cash flow.
You’ve heard the phrase, “living beyond one’s means” or “trying to keep up with the Joneses.” These people may be incurring high lifestyle expenses, while not keeping up with their survival expenses. This typically results in very high credit card bills or home equity loans and, if not corrected, can be financially disastrous.
Understanding, budgeting, and planning for survival and lifestyle expenses is reasonably easy during your working years. However, once the steady salary stops and retirement begins it becomes crucial to establish a secure cash flow to cover your survival expenses—one that is independent of market activity. The financial crisis and recession occurred just three years ago. Retirees who did not have a secure cash flow to cover their survival expenses became highly anxious and predisposed to panic selling as they saw their nest eggs drop in value.
What can you do to ensure that your Survival expenses are covered? Set aside the assets you need to meet mandatory expenses in a low-risk account that offers stability of principal. Establish a second fund for lifestyle expenses that can be invested with a growth and income strategy. Remember, your lifestyle expenses are negotiable. They can be put on hold or minimized in a falling market to allow your investments to recover over time. Once you’ve secured your survival fund, rest assured that the absolutely necessary expenses in your life will be taken care of.
And for the extras? You can always take that trip to Paris next year!
Read the article on U.S. News & World Report here! >
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for individual. To determine which investment is appropriate please consult your financial advisor prior to investing. All performance references are historical and are not a guarantee of future results. Strategies involving asset allocation and diversification do not ensure a profit or protect against a loss.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Capital Management, LLC [“Monument”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Monument is engaged, or continues to be engaged, to provide investment advisory services. Monument is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.
A copy of the Monument’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.monumentwealthmanagement.com/disclosures. Please Note: Monument does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Monument’s website or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your Monument account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your Monument accounts; and, (3) a description of each comparative benchmark/index is available upon request.
Please Remember: If you are a Monument client, please contact Monument, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.