Your Monthly Budget Is Probably Wrong. Here's How to Fix It.

Most people guess what they spend each month. We don't guess. We pull the statements, go page by page, and do the math. What we find almost always surprises people.

Read the full article: https://news.americanretirementadvisors.com/inspect-what-you-expect/

American Retirement Advisors helps families in Arizona and Nevada navigate healthcare, retirement income, and inheritance planning. Want to reach out? Text us at (602) 975-0372, email support@americanretire.com, or visit https://americanretirementadvisors.com.

Transcript

SPEAKER_00 0:01

Welcome to the American Retirement Advisor, coming to you from One to Three Z Studios. Real stories, real strategies, and straight talk about healthcare, retirement income, and inheritance planning. I'm Ian Schaefer, joined with Eddie and Betty. Let's get into it.

SPEAKER_01 0:16

How much do you spend each month? If your answer starts with, I think it's about, then your retirement plan might be built on a guess, and a guess is not a plan. When someone sits down with our team to build an income plan, we do not start with a round number. We do not ask you to estimate what you think you spend. We ask you to bring in your bank statements and credit card bills. Three months minimum. Six months is better. And then we go through them, page by page, line by line.

SPEAKER_02 0:46

Ian Schaefer's father, David Schaefer, has a phrase he uses with every client. Inspect what you expect. If you expect your plan to work, you need to inspect the numbers it is built on, not the numbers you hope are true, the ones that actually are. This is the part that surprises people the most. We sit down, we go through the statements, and someone will spot a charge and say, well, that was the new roof, that was $12,000, but that will not happen again. Fair enough, so we set it aside.

SPEAKER_01 1:19

Then we look at the next month, the car needed new brakes, $900. That's unusual, they say, that will not happen again either. Month three, the refrigerator died, $2,200. That was a one-time thing. Month four, the grandkids came to visit and they took everyone to dinner three times and bought the kids school clothes, $1,800. Well, that only happens once a year. Month five, the water heater. Month six, a dental crown that insurance did not cover.

SPEAKER_02 1:53

By the time we get through half a year of real statements, a pattern becomes obvious. There is no such thing as a normal month. Every month has something. The roof is a one-time expense, but life is not a one-time expense. Something is always breaking, something always needs replacing, someone always needs something, and that is okay. That is just real life. The problem is not that these expenses happen. The problem is when a plan does not account for them.

SPEAKER_01 2:23

Most people, when asked what they spend, round down. It is not intentional, it is just how the brain works. You remember your mortgage, your car payment, your insurance, your groceries, the recurring predictable stuff. You add it up and you get a number. Maybe $5,000 a month, maybe $6,000. But you forget the $200 Amazon order. You forget the vet bill. You forget that you subscribe to three streaming services you do not watch. You forget the property tax payment that hits twice a year. You forget the trip you booked for September. You forget the gift cards for birthdays and holidays.

SPEAKER_02 3:02

When we actually add up the statements, the real number is almost always 15 to 25% higher than what people estimated, sometimes more. That is not because anyone is being dishonest, it is because spending is invisible when it happens $47 at a time. One of our advisors, Kyle Jacobs, puts it well. Thinking you have enough money, knowing you have enough money, are two very different items. The same thing is true for spending. Thinking you spend $5,500 a month and knowing you spend $7,200 are two very different foundations to build a plan on.

SPEAKER_01 3:41

So what does inspect what you expect actually look like? Here is how it works when someone goes through this with our team. First, we gather three to six months of bank statements and credit card statements. Not a budgeting app, not a summary, the actual statements with every transaction listed. Then we sort the spending into buckets, fixed costs that do not change, mortgage or rent, insurance premiums, car payments, variable costs that fluctuate, groceries, gas, dining out, utilities, and then the wild cards, the repairs, the medical bills, the travel, the gifts, the things that will not happen again, but always do.

SPEAKER_02 4:24

We average the fixed costs, we average the variable costs, and for the wild cards, we add them all up across the full period and divide by the number of months. That wildcard number is the one that opens people's eyes. It is real, it is documented, and it belongs in the plan. When we build an income plan around those real numbers, something changes. The plan stops being theoretical. It becomes yours. It reflects the life you actually live, not the life you think you are supposed to live on paper.

SPEAKER_01 4:58

You do not need an advisor to do this exercise. You need a kitchen table, a stack of statements, and an honest hour. Pull your last three months of bank statements and credit card statements. Grab a notepad or open a spreadsheet. Go through every transaction. Not the categories your bank assigns, the actual charges. Write down the total for each month. Then look at what surprised you. Look at the charges you forgot about. Look at the one-time expenses and count how many one-time expenses showed up across three months.

SPEAKER_02 5:30

If the number is higher than you expected, do not panic. That is the point. You are not looking for a number that makes you feel good. You are looking for the number that is true. Because a plan built on the real number will actually hold up. A plan built on the comfortable number will not. This matters even more in retirement. When you're working, a budget that is off by 20% means you save less than you planned. You adjust, you make more next quarter. There is always next month's paycheck to cover the gap.

SPEAKER_01 6:03

In retirement, there is no next paycheck. Your income is fixed. Social Security, a pension, withdrawals from your accounts. If the plan says you need $6,000 a month and you actually need $7,500, that gap does not fix itself. It compounds. That is the slow drift that creates the anxiety people carry around at 2 a.m. But when the plan is built on real numbers, on inspected numbers, that anxiety goes away. Not because you spend less, because you know what you spend, and knowing is the whole game. David Schaefer has told clients this for 25 years. You've earned your way past that requirement, so you can quite honestly do whatever you want, whenever you want. But that freedom only works if the numbers underneath it are honest. Inspect what you expect. The rest takes care of itself.

SPEAKER_02 7:00

A quick note before we wrap up: today's episode covers financial topics for educational purposes only. American Retirement Advisors does not provide tax or legal advice. Please consult a CPA or tax professional before making any decisions based on what you heard today.

SPEAKER_01 7:17

This is Betty with the American Retirement Advisor. Thanks for listening. If this episode helped you think differently about your retirement, share it with someone who needs to hear it. You can read the full article and browse hundreds more at AmericanRetire.com. And be sure to subscribe so you never miss an episode. We publish daily. See you next time.

SPEAKER_00 7:40

Thanks, Eddie. Thanks, Betty. Until next time, this is Ian Schaefer coming to you from 123 Easy Studios. I hope you've enjoyed this recording of the American Retirement Advisor, where we make healthcare, income, and inherence planning 123 Easy.