At What Age Can You Finally Enjoy Your Money? Here's What Dave Ramsey Says
People spend decades saving money and building up their nest eggs, and most don't know what to do when it's finally time to step back and enjoy that wealth. Enjoying the wealth too soon may result in you running out of cash while you are still alive, but if you wait too long, you may miss out on a lot of bucket list items.
Financial guru Dave Ramsey recently joined the Iced Coffee Hour Podcast and revealed how to tell if you are ready to splurge.
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Wrestling With Mortality
Ramsey and the Iced Coffee Hour co-hosts acknowledged that people wrestle with their mortality more once they hit their 60s. Ramsey said that you start counting your days at that point and wonder how much longer you can travel and do exciting things.
While Ramsey emphasized having an inheritance for his children's children, he also uses the "Why wouldn't I?" mindset for any purchases. For instance, he and his wife bought a new set of golf clubs because they said, "Why not?" That type of purchase won't impact Ramsey's nest egg because he has spent several decades building it up to its current level. Ramsey used the same mindset to justify going on a cruise and flying to Scotland for a vacation.
Use This Test To Determine Whether You Can Spend Money
Although Ramsey isn't afraid to spend money on experiences and non-essentials, he isn't reckless. The financial guru believes that you should assess how your life would change if you had to burn the money that you intended to spend. For instance, if you want to take a $10,000 vacation, how much would your life change if $10,000 vanished from your nest egg?
Someone with a multimillion-dollar nest egg and very few living expenses can probably pull off this type of vacation. However, a broke 26-year-old can't make it work. The young individual would get deep into debt for the vacation, which would limit their ability to build a nest egg.
If a purchase makes you nervous about how you can keep up with living expenses or if you will outlive your nest egg, it's best to avoid it. Ramsey always thinks in percentages to ensure he is never spending too much money.
Many people use the 4% withdrawal rule to take out money from their portfolios while giving themselves exposure to additional investment gains. Sticking within this percentage and possibly inching up to 5% in some years can keep your retirement portfolio intact.
Your 60s Are Different From Your 70s
People tend to spend less money as they get older. Retirees in their 70s aren't traveling as much as people in their 60s. As people get older, they can't travel as often, and health issues may arise. That's why some people travel more often in their 60s and keep expenses low in their 70s.
It's okay to spend a little more in your retirement if you can afford it. People who are living paycheck to paycheck and relying on Social Security to break even shouldn't spend for the sake of it. While Ramsey was able to afford new golf clubs without impacting his retirement savings, that's not true for everyone. You should not spend your last few thousand dollars on a set of golf clubs or commit to any type of purchase that can jeopardize your ability to provide an inheritance for your children's children.
The article will focus on when Dave Ramsey says it is a good idea to enjoy your money after saving and investing for many years.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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