The Secret to a Healthy, Happy, Stress-Free Retirement

This post The Secret to a Healthy, Happy, Stress-Free Retirement appeared first on Daily Reckoning.

Did you know retirement ranks 10th on the list of life’s 43 most stressful events?

I have to say, I was a little surprised.

If you’re not familiar with the Holmes and Rahe Stress Scale, it was invented in 1967 as a way for doctors to predict whether certain stressors in a patient’s life could increase their risk of serious illness.

Two researchers by the name of Thomas Holmes and Richard Rahe came up with the scale after combing through 5,000 medical records. What they found was a strong correlation between life’s most stressful events and illness. Surprise.

Since then the scale has been retested for reliability and it still holds true today.

Like I said, retirement ranks 10th on the list!

Here are Holmes and Rahe’s 10 most stressful life events (you can see the full list here):

  1. Death of a spouse (or child): 100
  2. Divorce: 73
  3. Marital separation: 65
  4. Imprisonment: 63
  5. Death of a close family member: 63
  6. Personal injury or illness: 53
  7. Marriage: 50
  8. Dismissal from work: 47
  9. Marital reconciliation: 45
  10. Retirement: 45

The numbers next to each life event are called “Life Change Unit” scores — and when added up over the span of a year, the total predicts your likelihood of illness.

Here’s how the scoring works:

  • 80% likelihood of illness for scores over 300
  • 50% likelihood of illness for scores between 150-299
  • 30% likelihood of illness for scores less than 150

Is Retirement Good or Bad for Your Health?

Researchers have been trying to answer this question for awhile now. More recently, the Harvard School of Public Health ran a study that looked at rates of heart attack and stroke among men and women in the ongoing U.S. Health and Retirement Study.

Out of 5,422 participants in the study, those who had retired were 40% more likely to have had a heart attack or stroke than those who were still working. The increase was highest during the first year after retirement, and leveled off after that.

Other studies have reported the opposite effect. Some people actually showing improvements in their overall health once into retirement.

But the most interesting study, in my opinion, on retirement as it relates to health and happiness was conducted out of Taiwan University and published in Applied Research in Quality of Life.

The study looked at how time management affects retirees levels of happiness and overall quality of life. Specifically, how you manage your free time.

According to the study, free time refers to those periods when people are under no obligation and can decide for themselves what to do.

What the study found was effective management of free time has a far greater impact on a retiree’s quality of life than the amount of time the person actually has available for leisure activities.

“Individuals who manage their free time well enjoy a higher quality of life, whereas those who gain free time but do not use it properly gain little benefit,” the authors wrote.

The Secret to a Happy Retirement — Goals!

If you think you need to block out every minute of your day to enjoy your golden years, it’s not that drastic. The study found that retirees gained the most benefit by simply setting a few daily or weekly goals and priorities for their free time.

A goal could be simply “I want to maintain relationships with my friends by joining in at least two recreational groups and programs.”

The study’s author concluded the paper by saying that governments, community centers and service organizations should consider programs that teach people how to manage and schedule their free time better to make the most out of retirement.

I must admit, it’s not a bad idea. If you consider your life before retirement, you likely had a predictable routine. Work took priority, and you scheduled everything else around it.

Your daily and weekly goals might have been taking the kids to baseball practice or getting your car oil changed. But you had events and activities you were working towards that kept you sharp.

I think keeping a routine is a necessary part of retirement. It might seem like you have nothing but time in retirement — and you do — but without some structure, you’ll quickly find the days, months, and years start slipping away.

Building a routine you enjoy and setting a few weekly goals is a simple recipe to follow for a happy and stress-free retirement.

The last thing I’ll say about building a routine is it comes with one other added benefit.

By knowing what you’ll do and when, you can project more accurately your expenses. If you plan on going out for brunch every weekend, you can budget for that kind of expense.

The same goes for any recreational memberships or leagues you join. With more free time on your hands, you might end up starting an expensive hobby.

Getting your routine dialed in will help you predict how your free time will impact your retirement spending.

And, if you’re not yet retired but close, practicing your retirement routine is another good way of figuring out what you like and if your budget can sustain it.

To a richer life,

Nilus Mattive

Nilus Mattive

The post The Secret to a Healthy, Happy, Stress-Free Retirement appeared first on Daily Reckoning.

Control Your Frivolous Spending in 6 Easy Steps

This post Control Your Frivolous Spending in 6 Easy Steps appeared first on Daily Reckoning.

One of the downsides to saving large sums of cash is it starts to burn a hole in your pocket.

When I was a kid, my grandparents would occasionally give me a $10 bill after I’d go visit for a week. I had zero tolerance for saving back then, so I would spend it on candy and comic books almost immediately.

Since then, I’ve built up a pretty good tolerance against spending cash. I’ve seen too many financial struggles and missed opportunities to not have a decent stockpile of cash in my bank account.

As of late though, my tolerance against spending is being tested. With a looming bear market, hoarding cash doesn’t feel like a bad investment.

The problem is this extra money starts tempting you. And, the last thing you want to do is waste your hard saved cash on something frivolous.

So, what should you do?

Here are 6 “easy” tips to help you control spending. I say easy because none of these require any extra discipline or extravagant measures. All you’ll need is a calculator, a pen and pad of paper.

The fastest way to boost your savings is by not spending what you have. If you want to accumulate more money, you need to learn some tricks to keep your spending urge at a minimum. Here are some tips I like:

Tip 1: Calculate How Much in Gross Income Is Needed to Buy

How much does it cost to buy a $90,000 Porsche 911 Carrera? It takes about $136,000 in gross income at a 30% effective tax rate. At a 25% effective tax rate, it requires $2,700 in gross income to purchase the newest $1,799 Macbook Pro.

Whatever you’re thinking about buying, multiply it by 1.5x to find out how much it really costs before tax. Suddenly, what you want to buy doesn’t seem as affordable.

Tip 2: Calculate How Many Hours of Work It Takes to Buy

If you work a salaried job, then you likely don’t pay much attention to your hourly rate.

However, understanding how much labor is required to afford something is sometimes the best strategy to give yourself some pause.

For example, to buy a $9,000 second-hand Rolex Submariner will take about 450 hours driving for Uber at $20/hour after operating costs. If you drive for 40 hours per week, that’s almost 11.5 weeks worth of work to purchase one watch.

Tip 3: Save 50% of Your After Tax Income Every Year

This might sound challenging, but I promise it’s not. As long as you’re maxing out your 401k and saving a certain percentage of your after tax income before you spend, you can afford to do whatever you want with your money after that.

But one idea I like is to max out your 401k and then save 100% of every other paycheck. Since most employers pay out twice a month, you can easily save at least 50% of your after tax income every year by following this plan.

It’ll be painful for the first 6 months, but after that you’ll adjust your living standards and it becomes easy.

Tip 4: Compare Yourself to Other People

If you make more than $35K a year, you’re in the top 1% of global income earners. Appreciate what you have compared to the billions of other people who weren’t lucky enough to be born in a developed country.

According to the UN world food program, some 795 million people in the world do not have enough food to lead a healthy active life. Simply comparing your circumstances to those less fortunate is sometimes enough to curb those impulse buys.

Alternatively, you can try motivating yourself by comparing your wealth and career success to other people your age who are doing better than you. Depending on your personality type, this can be really motivating and force you to keep boosting your savings in order to catch up.

Tip 5: Establish a Spending Goal

There’s a rule I like which states that whatever you want to buy, you should try to make at least 10x that amount first. For instance, if you want to buy a $30,000 car, try making $300,000 first. This is a tough rule to stick to but it forces you to achieve certain financial goals tied to big rewards.

What you’ll find is after spending all this time earning and saving enough to reach your big goal, you might lose the desire to actually buy what you originally thought you wanted.

Make your spending goals challenging so when you reach them it’s worth the pain to make the purchase.

Tip 6: Visualize the Opportunity Cost of Your Purchase

If the S&P 500 averages 7% a year for the next 10 years, you’ll have doubled any money you invest today in the index. Therefore, the $9,000 watch or $30,000 car you buy today might be worth $18,000 and $60,000 respectively in the future. Visualizing opportunity cost is one way to prevent spending, but it’s hard because it’s difficult seeing that far into the future. One easy way to see the future is by running your finances through a retirement calculator. You’ll quickly see whether you’re on track to retirement or not.

Boosting savings is not rocket science. Yes, it requires some discipline but if you follow these simple tips on how to curb your spending, you’ll build a high tolerance and see your bank account grow.

To a richer life,

Nilus Mattive

Nilus Mattive

The post Control Your Frivolous Spending in 6 Easy Steps appeared first on Daily Reckoning.

6 Easy Ways to Control Spending

This post 6 Easy Ways to Control Spending appeared first on Daily Reckoning.

One of the downsides to saving large sums of cash is it starts to burn a hole in your pocket.

When I was a kid, my grandparents would occasionally give me a $10 bill after I’d go visit for a week. I had zero tolerance for saving back then, so I would spend it on candy and comic books almost immediately.

Since then, I’ve built up a pretty good tolerance against spending cash. I’ve seen too many financial struggles and missed opportunities to not have a decent stockpile of cash in my bank account.

As of late though, my tolerance against spending is being tested. With a looming bear market, hoarding cash doesn’t feel like a bad investment.

The problem is this extra money starts tempting you. And, the last thing you want to do is waste your hard saved cash on something frivolous.

So, what should you do?

Here are 6 “easy” tips to help you control spending. I say easy because none of these require any extra discipline or extravagant measures. All you’ll need is a calculator, a pen and pad of paper.

The fastest way to boost your savings is by not spending what you have. If you want to accumulate more money, you need to learn some tricks to keep your spending urge at a minimum. Here are some tips I like:

Tip 1: Calculate How Much in Gross Income Is Needed to Buy

How much does it cost to buy a $90,000 Porsche 911 Carrera? It takes about $136,000 in gross income at a 30% effective tax rate. At a 25% effective tax rate, it requires $2,700 in gross income to purchase the newest $1,799 Macbook Pro.

Whatever you’re thinking about buying, multiply it by 1.5x to find out how much it really costs before tax. Suddenly, what you want to buy doesn’t seem as affordable.

Tip 2: Calculate How Many Hours of Work It Takes to Buy

If you work a salaried job, then you likely don’t pay much attention to your hourly rate.

However, understanding how much labor is required to afford something is sometimes the best strategy to give yourself some pause.

For example, to buy a $9,000 second-hand Rolex Submariner will take about 450 hours driving for Uber at $20/hour after operating costs. If you drive for 40 hours per week, that’s almost 11.5 weeks worth of work to purchase one watch.

Tip 3: Save 50% of Your After Tax Income Every Year

This might sound challenging, but I promise it’s not. As long as you’re maxing out your 401k and saving a certain percentage of your after tax income before you spend, you can afford to do whatever you want with your money after that.

But one idea I like is to max out your 401k and then save 100% of every other paycheck. Since most employers pay out twice a month, you can easily save at least 50% of your after tax income every year by following this plan.

It’ll be painful for the first 6 months, but after that you’ll adjust your living standards and it becomes easy.

Tip 4: Compare Yourself to Other People

If you make more than $35K a year, you’re in the top 1% of global income earners. Appreciate what you have compared to the billions of other people who weren’t lucky enough to be born in a developed country.

According to the UN world food program, some 795 million people in the world do not have enough food to lead a healthy active life. Simply comparing your circumstances to those less fortunate is sometimes enough to curb those impulse buys.

Alternatively, you can try motivating yourself by comparing your wealth and career success to other people your age who are doing better than you. Depending on your personality type, this can be really motivating and force you to keep boosting your savings in order to catch up.

Tip 5: Establish a Spending Goal

There’s a rule I like which states that whatever you want to buy, you should try to make at least 10x that amount first. For instance, if you want to buy a $30,000 car, try making $300,000 first. This is a tough rule to stick to but it forces you to achieve certain financial goals tied to big rewards.

What you’ll find is after spending all this time earning and saving enough to reach your big goal, you might lose the desire to actually buy what you originally thought you wanted.

Make your spending goals challenging so when you reach them it’s worth the pain to make the purchase.

Tip 6: Visualize the Opportunity Cost of Your Purchase

If the S&P 500 averages 7% a year for the next 10 years, you’ll have doubled any money you invest today in the index. Therefore, the $9,000 watch or $30,000 car you buy today might be worth $18,000 and $60,000 respectively in the future. Visualizing opportunity cost is one way to prevent spending, but it’s hard because it’s difficult seeing that far into the future. One easy way to see the future is by running your finances through a retirement calculator. You’ll quickly see whether you’re on track to retirement or not.

Boosting savings is not rocket science. Yes, it requires some discipline but if you follow these simple tips on how to curb your spending, you’ll build a high tolerance and see your bank account grow.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

The post 6 Easy Ways to Control Spending appeared first on Daily Reckoning.