Frugal Scholar writes about the latest budgetary convulsions in her state, recurring politico-fiscal nightmares that have already had baleful effects on higher education there. With one kid fresh out of college and the other on the brink of (parent-assisted) homeownership, the sails of the Good Ship Retirement have appeared on the horizon. Though she says she’d like to teach several more years, FS reports that she’s fallen into the habit, particularly where optional expenditures are concerned, of asking herself “what would I do about this if I had only one more year before retirement?”
Good question, isn’t it? She finds it deflects impulse buys. But it’s also an interesting mind-set — maybe one that anyone of any age should engage.
What if we all kept in the back of our minds that we had OMY — One More Year — before we chose to or had to quit working? What would that do for us?
Well, obviously, it would make us think twice about the various extravagances and flings we’re inclined to when we know that a steady income will replenish savings or pay off the credit card within a month or two or three. It might lead us to plan for the future more carefully: what kind of housing would we like to have, once we’re retired? And where? How much, realistically, is it going to cost us to live in retirement? If the projected retirement date were accelerated by x or y years, how much should we be saving now to accommodate such a change in plans? What kind of vehicle will we drive? How will we fill the free hours…maybe with volunteering? travel? a new job or enterprise? hobbies?
My dean gave me nine months’ notice, although I realized well before then that the university was unlikely to continue to keep our expensive research support office, what with the president saying he would pare back operations that did not contribute directly to the institution’s primary mission, teaching.
So what was the OMY effect on me, a person who actually knew she had only one more year of employment?
• Debt clearance. The number-one goal was to get rid of a $30,000 home-equity loan I’d taken out to renovate the house my son and I copurchased, to make it livable for him. It required me to take a second job, but I accomplished that.
• Budget reallocation and expense control. Believing I soon could be living under the Seventh Avenue Underpass, I started getting used to spending a lot less. Over the course of nine months, I cut the discretionary budget from $1,500 a month to $900, and aimed to get it down to $850. I got used to running the air conditioning a lot less during the summer and trained myself to tolerate uncomfortable temperatures inside the house.
• Food purchase habits. I began stockpiling nonperishable foods, such as canned goods, beans, and rice. Eventually I bought a freezer so I could store meats and frozen vegetables purchased on sale or in bulk.
• Cultivation of new income sources. I got my foot in the door at Heavenly Gardens Community College, so that a teaching gig of 3 & 3 + 1 — the maximum number of courses an adjunct could teach at the time — was waiting for me the minute I walked off the Great Desert University campus. Meanwhile, I ramped up The Copyeditor’s Desk so the contract editorial work was flowing in by the time the salaried job ended.
• Early Social Security draw. With retirement investments down by something over $200,000, my financial manager strongly advised me to delay drawing from savings as long as possible. Even though it was not in my interest to start Social Security before reaching so-called “full” retirement age, the piddly income from teaching and freelance editing was not enough to keep me in my home and put food on the table. So, I was forced to start taking Social Security two years before “full retirement age” and six years before I had planned to do so.
When one is laid off a job in one’s sixties, one is “fully” retired, no matter what some rule-making bureaucrat or affluent legislator imagines. I applied for job after job after job — everything that I was well qualified for, everything that I was even remotely qualified for, and everything I figured I could stand to do even though it was menial work. Believe it: no one is interested in hiring an elderly worker, especially not during a major recession.
• Postponed or canceled decisions about planned major purchases. Even at the time the job ended, my car was reaching its dotage. Normally I keep a car for 10 years or until it reaches 100,000 miles, whichever comes first; the Dog Chariot was 10 years old on the first day of my surprise retirement. I’m still driving the thing. It’s rounding on 14 years old now and has almost 120,000 miles on the odometer. I probably will run it into the ground before buying a new tank.
All of these OMY strategies cushioned the fall into permanent unemployment (which is, after all, what retirement really is).
And when one bounces off that trampoline into a brave new world, one finds that permanent unemployment is just another word for freedom. Today I can’t even imagine going back to a full-time job — perish the hideous thought!
It really is true, contrary to the warnings of ever so many financial advisors who want you to give them your money to invest, that you can live a lot more cheaply in retirement than you do while you’re working. With fewer external demands pushing up your expenses, it simply doesn’t cost very much to live well.
I’ve managed to stay in my home, despite increasing insurance and tax bills. My son and I have not defaulted on the downtown house (although, admittedly, for awhile it did look like we might have to). I don’t seem to be having any trouble keeping the place maintained. Gerardo is still employed. Various workmen still find jobs to do around the place, and none of them is being asked to go hungry. I still have a dog. I can still buy the clothing I need, whenever I feel so inclined (which isn’t often). I can still get a monthly haircut. And I can even go out to lunch or dinner occasionally.
Without the cost of a daily commute, without the need to buy and wear expensive dry-clean-only clothes, without the five-day-a-week restaurant lunches, without the repair bills occasioned by the wear & tear on your car, and without the many other expenses one invests in a career, you save a surprising amount of money. And one quickly becomes accustomed to buying more intelligently, to curbing extravagances, and to cutting waste — so quickly that these new habits are not perceived as significant hardship.
Thinking about your financial life as if you had only One More Year to go will not only help you to get your money affairs in order, it will smooth the way into a comfortable and happy retirement.