137 Retirement Budget Calculator

Jason and Emilia discuss the launch of Retirement Budget Calculator.



Below is the full transcript:

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Announcer: Welcome back America to Sound Retirement Radio, where we bring you concepts, ideas and strategies designed to help you achieve clarity, confidence and freedom as you prepare for and transition through retirement, and how here is your host, Jason Parker.

Jason: America, welcome back to another round before Sound Retirement Radio. I’ve got a great show for you today. The episode number is 137. The title is retirement budget calculator, and it is my good fortune to have Emilia Bernal on the program with me this morning. Emilia, welcome back.

Emilia: Thank you. Hello.

Jason: Before we get started, there’s two things we like to do in the morning to get people’s day started right. The first one is we want to renew our mind, and this verse just popped up when I first opened up my app this morning. I thought it was very appropriate. It’s from Proverb 16 verse three, “Commit to the Lord whatever you do and he will establish your plans.” That’s going to go I think perfect with the show that we’re going to be talking about. Then, you’ve got a joke for us, Emilia.

Emilia: Yes. I was thinking of okay, something that would go with the show. We’re talking about money usually, so here’s my joke for today. Why can’t you bend a penny?

Jason: I don’t know. Why?

Emilia: Because change is hard. Gosh, yeah. I never thought about it that way.

Jason: Emilia, I’m so glad you’re here to share the jokes with … Change is hard.

Emilia: Change is hard.

Jason: That’s the truth.

Emilia: Yeah, today is a very exciting day as you mentioned. Will you share with our listeners about the launch of the retirement budget calculator?

Jason: Retirement budget calculator.

Emilia: Yay.

Jason: This is a project I’ve been working on for a year now, and I’m really excited to bring it to our listeners, because I think it’s going to make people’s lives better as they’re preparing for retirement. It is exactly what it sounds like. We created some software for folks which they can find at retirementbudgetcalculator.com to help people create a better spending plan as they’re preparing to make this transition into retirement. This project started out like all great things in life as a spreadsheet for those of us that are nerds and love our spreadsheets. Originally we were going to distribute this spreadsheet to people. We were just going to make it available as a download, and we realized the spreadsheet was getting very complicated. Some of the if-then-else statements grew to be huge, and so I thought, boy, if we try to distribute … I mean, the spreadsheet was close to 30 megabytes which people that know spreadsheets know that that’s a pretty hefty spreadsheet. We just thought that’s too complicated. We need to make it simpler, and so we created software that lives online so that people can just access it that way.

Emilia: Yeah. You kind of touched on it. Why did you create the retirement budget calculator? What was your main focus there?

Jason: Well, first of all, at Parker Financial my investment advisory firm where we do all of our work is around retirement planning. I mean, most people know Sound Retirement Radio is the radio show. Sound Retirement Planning is my book, and so much of our financial industry is focused on accumulation, and they’re focused on what’s the rate of return you can earn on your money? What I’ve learned is that because retirement’s all about cash flow, it’s your income that determines your lifestyle in retirement. One of the primary questions that people always have when they want to sit down and have us help them create a plan is they want to know have they saved enough. There’s really no way for us to be able to answer that question unless we understand the spending side of their life, because all of the formulas that are used for determining retirement planning has to do with spending.

 What I found was there just wasn’t really a good financial tool out there to really help people with their retirement budgeting. It’s different than a lot of the others tools out there. I just wanted to share a quick story too, Emilia, because I think probably one of the biggest fears that people have is making an irreversible financial mistake as they’re preparing for retirement. There is a couple that I met with, gosh almost 10 years ago now. They came in and we sat down, and this was after the financial crisis and the stock market had really tanked. When they had retired, they had saved about $500,000.00. By the time they had come into my office, they were only in their 70s and due to spending too much in the early years and then really bad stock market performance, their money was almost gone. I just remember the stress in their eyes. The concern, the fear, the worry about having to go back to work now in their mid-70s. The concern about maybe having to sell their house and downsize.

 I think that one of the number one, probably the biggest mistake people could make is really not understanding their spending, spending too much, and then being in this position that I think most people dread, which is running out of money before you run out of retirement. I thought everybody needs this. It doesn’t matter if you’ve saved $10 million or if you’ve saved $25,000. Everybody needs to understand the spending piece, and that’s what the budget retirement calculator is designed to do, is help people have a better spending plan.

Emilia: That’s great. That is very important. Everyone always comes in asking, “How can we make our money last?” How is this budgeting tool different from the other software that is available?

Jason: Well, and again, so part of my frustration was is I went out and I tried a lot of these different software tools that were out there because I wanted something that I could recommend to my clients. Most of them weren’t designed to do what our tool’s designed to do. Most of the software out there is designed to help people allocate every penny, and it’s to help them get out of debt and track all of their expenses and frankly it become overwhelming, because most of the people that we serve, they don’t want to sit and take every single expense that comes in and allocate it across these different categories. What happens is most people just fail at budgeting because it becomes burdensome. It becomes like this weight around their ankle, and I don’t think it has to be that complicated, especially not for retirement budgeting.

 Our tool’s different for a couple of reasons. Number one, it’s not designed to be something that you’re messing with every day, every week, and every month. My belief is once you create a good budget, you only have to adjust it as life changes, or maybe revisit it once a year just to make sure that we’re still on track. Number two, like a lot of the software out there require you to put in your usernames and passwords for all your different accounts and then it pulls all of this data in. Most of the people said they’re not comfortable with that. They don’t like this single point of failure in software, and so we’ve created this tool to work a lot more like an Excel spreadsheet where they can keep everything plain vanilla. They don’t have to put in all of their personal information, but it’s going to really help them organize their expenses.

 One of the things that we’ve been receiving feedback from some of our early test users has been the fact that we allow you to assign a different inflation factor to each expense because some expenses are going to increase with inflation and some aren’t. For example, you might have a mortgage that’s not paid off yet as you’re making the transition into retirement. Well, mortgage doesn’t go up every year with inflation. Our calculator lets you say well, there’s not going to be any inflation on a mortgage. It also allow you to say if you want to assume a higher inflation rate for medical costs than for food costs, you can do that.

 Then, what we allow you to do is to peek out into the future. We say, okay, well you can not only assign inflation dates, but you can also stop certain expenses. Maybe your mortgage is going to be paid off in five years. You can look out 10 years into the future, and say well, with inflation and knowing that the mortgage is going to be paid off, we can see that this is how our budget is going to change over time. That’s really an important component. The other thing that is I think unique about our calculator is we wanted people to not just have a monthly average.

 See, a lot of people say they’re look at January and they’ll say, “I need $5,000 a month.” That’s really not a good way to budget because people have one-off expenses, and so we wanted to give them a calendar view so they could actually see every month how their spending is going to change to really get a more granular understanding of their expenses. Again, retirement budget calculator is something that I wanted to refer my clients to. I couldn’t find anything, so I said, “Well, let’s create it,” and that’s what we’ve done.

Emilia: That’s great. That is great. As usual, is there a fee for retirement budget calculator or a monthly or annual subscription?

Jason: Well, that’s the other thing, and this is from the people that we serve. Number one, people … and we may change this over time, but initially what we thought was rather than feeding people a bunch of advertising like so much software does today and you have to share your personal information, we thought it would be better if we kept everything private, and we just gave people the opportunity to pay a one-time fee for the software instead of using the advertising model. Now, we may change that if the feedback comes in and people say, “Hey, we’re rather have this for free but see the ads.” We could consider that, but right now it’s a one-time fee that people pay. It’s not a monthly subscription fee. It’s not an annual subscription fee for version. Now, this is version 1.0. We do have a vision for how this could evolve and change over time, but for version 1.0, it’s just a one-time fee.

 One of the things I’m excited about is to share for our listeners and for the people that we consider part of our extended family, we’ve got a special discount that we’re going to share with them. Yeah, just a one-time fee to have access to it. The other thing is this is early. We just got out of beta testing, and I’m sure there’s going to be some little issues along the way. We just want to really honor the relationships and the people that we serve. Like I say, I think we’re really going make people’s lives better here.

Emilia: That’s great. Can we just take a minute to share with our listeners how they can get a great discount for a limited time?

Jason: Yeah. This is for a limited time. When they go to visit the calculator, they’ll see there’s a signup page. There’s a spot where you can put in a coupon code, and so the coupon code is going to expire in 30 days. If they type in the word family into the coupon code, we’re going to discount … we’re going to give them … I’m not even going to tell them how big of a discount it is because it’s so ridiculous. I hope it surprises and shocks and delights people how much they’re going to have to pay this one-time fee to have access to it. All they have to do is type in their code family for the next 30 days. If you miss it, that’s it. We do want to honor the relationships and give our listeners in our community the best possible deal on this thing, but if they call me day 31 and say, “Hey, can we still get the discount?” The answer is no. We have to stick with this.

Emilia: To all our listeners out there, remember, your friends, your family, please send them our way for the next 30 days and use the code family.

Jason: Family, yep.

Emilia: Family. Great. Let’s go on again with the budgeting. You often say, “Spending is not smooth.” Tell us more about that.

Jason: Yeah. Well, one of my favorite quotes on budgeting come from Benjamin Franklin. He says, “Beware of little expenses. A small leak will sink a great ship.” I just love that, because oftentimes when we’re thinking about our spending plan in retirement, we’re thinking about the things that are the big things that will recur all the time, but the reality is all of us have these one-off expenses. As we were developing the calculator, I got a bill that came in for my car tabs. Once a year, you pay car tabs. Well, when we were putting together all the different spending areas, I thought I forgot to put in car tabs. That’s something that comes up once a year, and we’ve got to spend it. That’s a small leak that will sink a great ship if you’re not paying attention to it.

 There’s other things that happen like property taxes occur once a year, or maybe some of the insurance premiums we pay occur once a year. There’s things like Christmas that happen every December that we want to be budgeting for. There’s gifts for kids and grandkids. We just wanted to create a tool that helped people account for all of these little nuances, because people talk about the fact that investment returns are not smooth in retirement. Everybody understands the sequence of returns from an investment standpoint. If you retire right at the time the stock market’s tanking, you’ve created a really bad situation for yourself. There’s also a sequence of spending risk, because if you spend too much in those early years and then at the same time you’re also experiencing a poor stock market performance, now you’ve got the absolute … the perfect storm that’s just has the potential to wipe you out. Understanding that spending is not smooth, that it’s going to change not just from month to month, but from year to year based on things like inflation, based on things like some expenses stopping and starting into the future.

Emilia: Yeah, that all makes sense. Great. Why do some people think of budgeting as a bad word? Is there anything you can do to make it sound better?

Jason: I know. Yeah, it is. In fact, a friend of mine, I had him in the office yesterday. I was showing him, I said, “Hey, we’re getting ready to share with the world the retirement budget calculator.” He said, “Can you change the name?” He said, “My experience is if you use the word budget in there, most people think of that as meaning having to cut back.” I thought, well, it’s a little bit late for that. We just got to roll with it. Budgeting for retirement is different than budgeting for people that just starting out for a number of reasons. Number one. I will say that the way that software’s designed is how my family personally budgets. There’s really a great sense of freedom that comes from having a budget. A budget is not about cutting back. A budget is about telling your money where to go so that you don’t have to wonder where your money went at the end of the month. Right? It provides you more peace of mind.

 I was reading that the number one cause of divorce in America is financial strain, people arguing over money. What if you came together with a game plan with you and your spouse so that there didn’t have to be arguments. Some people think, “It’s only young people that are just married that are arguing over money.” It’s not. I mean, this is happening on all walks of life. In fact, I had some folks in my office couple of years ago and they in retirement they had about $100,000 a year of income, which most people think that that’s a pretty nice income especially when you’re not working anymore. This is retirement cash flow, but they felt like they didn’t have enough. They needed more income. When I asked them, I said, “When you hear the word budget, what comes up for you?” One of them said, “Budgeting is a bad word. It means having to cut back.” The other one said, “That’s just being prudent.”

 It’s interesting how there’s an emotion associated with the budgeting for most people. When you’re in retirement, budgeting isn’t about cutting back. Budgeting really is creating a spending plan so that you can go out and spend as much money as you can confidently and hopefully not run out of money in retirement. That’s why you create a spending plan. It’s not because you’re trying to save more. It’s not because you’re trying to live frugally. It’s because you say, “Hey, I’ve worked hard. I got this money that I’ve accumulated. I want my last check to the underwriter or undertaker to bounce, and so let’s try to spend all the way as much as we can and not have to worry about running out of money in retirement.” That’s really the big difference. A spending plan is all about allocating resources.

 The other thing, Emilia, is once you retire, wat you have is what you have. You’re not making money anymore. Maybe you’re going to have Social Security. Maybe you’re going to have a small pension, but ultimately you need to know where your money’s going. There’s a couple of rules of thumb that I think are important for people. One of them is to be able to answer the question of have we saved enough, one way to do that is you take your annual spending and multiply it by 25 or 26 times. If you need say $40,000 a year, you need to have saved a million dollars. One of the other things that people don’t take into consideration with that formula though is Social Security. If you say, “Well, we know that we’re going to have X number of dollars Social Security.”

 Then, you can adjust that savings rate. Maybe it’s only going to be 18 or 19 times. That’s a general rule of thumb is you’re following the 4% rule. Like I say, retirement’s all about cash flow. You have to understand your spending. Most people want to a have a better spending plan as they’re getting ready for retirement. In fact, we did a lot of research, and we saw that there was people … there are a lot of people that go online and they’re searching for an Excel template to create a retirement budget, a retirement worksheet if you will. We created software that’s better I think. It’s less intimidating than an Excel spreadsheet without people having to go and recreate all these complicated formulas.

Emilia: Well, I think that one thing that stood out to me when about another word than budget is telling your money where to go. I think that stuck with me. You telling your money where to go. That might ease the sound of the budget word. Yeah.

Jason: Along those lines, one of the other things the calculator does. You can go in and you can say, “Okay, this is expenses due on the 1st or the 15th or the last day of the month.” Now, you’re organizing all of your finances. You can say what month of the year the expense occurs so if it’s just a one-time expense. That’s powerful. The other thing that we do and this goes back to the way that my family budgets, is we believe in the old fashioned envelope budgeting system where assign cash to certain expenses. I remember when my wife and I, when we finally, “We just don’t want to argue about money anymore. We want to come up with a good spending plan.” When we were sitting down to put together our spending plan, and we were talking about how much we wanted to allocate towards different areas, the amount of money that she wanted to allocate for salon, getting her hair done and her nails done versus how much I allocate towards that expense, I looked at that and I thought are you … This is totally nuts. This is crazy.

 That was important to her. Right? That’s an important expense, and there’s no wiggle room on that. Once I came to terms with okay, this is how much we have to budget for this, and we put that in that envelope every month. I don’t have to look at the debit card and say, “What are you spending all this money over here for?” Because we already know that that’s how much we’ve agreed to. We’ll review it once a year. We give the ability to allow people to tag expenses as cash. If they want to use the old fashioned envelope budgeting system that’s worked so well for so long, that’s a great way to do it. There’s studies that have been done that show that when you swipe plastic-

Emilia: You think about it.

Jason: … you spend more money. The nice thing about cash budgeting for those expenses you know you’re going to have every month. For us, a big one is dining out or going to the grocery store or child care or spending cash or getting our hair done or buying our pet food. These are some of the categories that we allocate cash to just because when the cash has gone out of the envelope, it means the spending’s done for that category.

Emilia: That’s a great way of looking at it. I think it’s opposite in my household. My husband has a higher hairdressing budget than I do. He goes every couple weeks, and we go to the same hairdresser.

Jason: Well, your husband, he is pretty fancy. If you guys don’t know Emilia, I was telling her the other day. We don’t want her husband to know this, but he kind of looks like some of these real popular actors out there. Who was the guy that-

Emilia: He said Orlando Bloom.

Jason: Orlando Bloom. Yeah, that’s who … I had just watched Pirates of the Caribbean with my son.

Emilia: It takes a lot of work sometimes, but he’s great.

Jason: Yeah. We’ll call him fancy pants.

Emilia: There you go. All right. I want to remind our listeners, if you want to get the great limited time offer to get the budgeting calculator for the next 30 days, go visit budgetingcalculator.com and put in the code family. I’m going to share this with all my friends, my family, and see how many of us we can get out there.

Jason: Absolutely. If you can’t remember retirementbudgetcalculator.com, if they just go to Sound Retirement Planning on the right-hand side, we’ve got a big picture that they can click on. It’ll take them right to the website. Again, this is a fee. This is a cost associated with the calculator. It’s not a free tool at this point. You actually have to pay to use it. I was listening to a song the other day, and I don’t know who the musician was. I didn’t get to hear the whole song. I just caught a glimpse of it. By the way, I was listening to it through my smartphone that is Blue toothed to my smart radio in my car that was streaming Amazon Prime, which the radio option that they have for Amazon Prime I think is so cool. I think it’s better than Pandora and all these other different steaming services personally.

 Anyway, the song came up and lyrics said, “I won’t trade my freedom for status or stuff.” When I heard that, it just really resonated with me because I think it’s easy to get caught in just more, more, more, more, spend, spend, spend, spend. The nice thing about budgeting is again you’re telling your money where to go. It doesn’t control your life anymore. There’s some joy that comes with learning to be content, and the fact that learning to be content is something that you actually have to learn. One of the things I’ve learned over the years is that it really doesn’t matter how much income you have. You will always find a way to spend it.

 When I was in college, I remember thinking if I could just make $10 an hour, life would be so good. Then, when I made $10 an hour, I thought, if I could just make $20 an hour, life would be so good. Then, I remember when I made $20 an hour, I thought if I could just make $40 an hour. What I found is until you learn this principle of telling your money where to go, until you learn how to really budget, it’s never enough. There’s always this desire for more, more, more, more. It’s about joy, it’s about freedom. It’s about having a spending plan, and spending every dollar that you can and doing it so confidently. I just hope that we get a lot of feedback from people. I hope they tell us what they like, what they don’t like, because I know it’s going to get better over time. I know it’s not perfect now, but it’s time to be introduced to the world. There you have it.

 Folks, you’ve been listening to Sound Retirement Radio. You’ll find us online at soundretirementradio.com or soundretirementplanning.com. This is episode 137. It is launch day for the retirement budget calculator. For a limited time we do have a coupon available for our listeners, for our extended family, for the people that we serve. We just really want to honor that relationship. I hope you are delighted when you see the discount. You just go to the signup page, and you will use the discount code family and you’ll see the price change. Before you put in any credit card information or debit card information to purchase the calculator, you’ll see what the cost is. Like I say, it’s an exciting time, Emilia. Retirementbudgetcalculator.com. Folks, this is Jason Parker. Until next week. Again, please reach out to us. Let us know what you think. I hope you’ll visit the calculator and give us some feedback. Until next week. Emilia, thank you for being here.

Emilia: Thank you.

Announcer: Information and opinions expressed here are believed to be accurate and complete, for general information only, and should not be construed as specific tax, legal or financial advice for any individual, and does not constitute a solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed in this program. Parker Financial, its representatives or its affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program. All insurance-related discussions are subject to the claims paying ability of the company. Investing involves risk. Jason Parker is the president of Parker Financial, an independent fee-based wealth management firm, located at 9057 Washington Avenue North West, Silverdale, Washington. For additional information, call 1800-514-5046, or visit us online at soundretirementplanning.com.

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