Spending Yourself Out of a Comfortable Retirement

According to a recent analysis by the personal finance website GOBankingRates, the U.S. average for retirement expenses is $835,453 for 25 years and $1,003,548 for 30 years. This means that for a 30-year retirement, the average American will need around $1 million to cover their expenses. This, of course, varies by state, with Hawaii being the most expensive, requiring a whopping $2 million, and West Virginia being the most affordable, requiring $700,000 for a 30-year retirement.

How much money do you need to retire in every U.S. state? It’s at least $1 million in 16 places. (Winter, M. – 2024, January 15).

While needing around $1 million to retire, unfortunately, according to the Federal Reserve, the average American between the ages of 55 and 64 has roughly only $185,000. That $185,000 is well short of the $1 million required for a comfortable retirement. Sadly, most Americans don’t start worrying about their savings until it’s too late, with 53% of Americans feeling they are financially unprepared for retirement.

Keeping up with the Joneses is a major contributor to Americans overspending and failing to save for retirement. Keeping up with the Joneses and trying to maintain a lifestyle you can’t afford just to mimic the lifestyle of someone else (your neighbor, a family member, or an influencer) is putting Americans in debt and keeping them from meeting their retirement requirements.

The proliferation of social media has exacerbated the Jones problem. The appetite for status symbols is putting American pocketbooks in jeopardy. From skincare products and vacuums to clothes and coffee machines, there’s something for everyone willing to pay an exorbitant price for something they may want but not necessarily need.

For example, yoga pants for $88? Alo Yoga has you covered. A bottle of perfume for $325? Baccarat Rouge 540 is your go-to scent. We’re just getting started. For expensive handbags, you have endless choices. There’s the $3,750 Loewe puzzle bag, the $5,100 checked Andiamo purse from Bottega Veneta, and the $5,890 Margaux tote from The Row. Outdoor clothes for indoor use are now all the rage. Arc’teryx has been making quality outerwear since 1989, but since some well-known athletes began sporting this brand, fans have followed. But if you want one of the brand’s coveted jackets, it will cost you a minimum of $300. Don’t forget the latest craze in skincare. NuFACE Trinity devices, which are said to tone your face, reduce wrinkles, and tighten skin with electric microcurrents, are all the rage on TikTok, and they’ll set you back $220 and $595. The quiet status symbols you’re going to be seeing everywhere in 2024. (Krause J.A., 2024, January 10).

Can’t afford a $595 device to rub all over your face to fight back wrinkles and time? Neither can most of the consumers who end up buying them. They just go into debt to do so.

The cycle of debt will price Americans out of retirement.

By going into debt, you become a slave to money, as every dollar you earn goes to paying to use someone else’s money. Unless you learn to put your money to work for yourself instead of for someone else, you will always be working, as evidenced by the number of Americans forced to continue working well into their retirement years.

How do you break out of the debt cycle? Stop spending money on frivolous status symbols and things that only tear down your net worth instead of building it up.

Unfortunately, the cycle of debt is the norm. Those who are able to break out of the cycle and achieve financial independence and personal fulfillment make simple changes to their habits to accumulate wealth instead of accumulating possessions.

The debt cycle is an equal-opportunity predator. It doesn’t matter how much money you make; anyone can fall into the trap of overextending and living paycheck-to-paycheck. Luckily, there’s hope. With a few straightforward tweaks, anyone can change their financial path.

Here are a few simple steps to get out of the debt trap and start on the path to financial freedom and a comfortable retirement:

Save, Don’t Spend.

Only buy what you need. Save the rest to put your money to work.

Make Money In Your Sleep.

If you don’t put your money to work, you will always be working for it. Instead of trading time for money, buy back your time by trading money for time through cash-flowing investments, especially ones backed by tangible assets like commercial real estate and private business investments that appreciate over time.

Ignore The Joneses. 

Stop buying what everyone else is buying and stop investing like everyone else. Model the ultra-wealthy, who eschew stocks in favor of private investments like real estate and investments in income-producing private businesses.

Leverage Expertise.

To make money in your sleep, you’ll have to learn to leverage the expertise of others by partnering with experienced professionals to grow your investment capital passively.

Don’t spend yourself into retirement oblivion. 

It’s never too late to change course to ensure a comfortable retirement. It all starts with discipline to avoid spending money on things you don’t need. Instead, put that money to good use by acquiring and investing in assets that will grow your net worth instead of destroying it.