When it comes to crafting a successful financial plan, there’s one question we always ask:
What does your future look like?
It’s not rhetorical. We genuinely need to know, because your vision for the future determines one of the most important inputs in our Financial Freedom Analysis: your future living expense goal. This single estimate can drastically alter the results of your plan. That’s why we encourage every client to complete our Living Expense Worksheet thoroughly and thoughtfully.
Your Future Life, Your Numbers
We understand that imagining retirement expenses when you’re 40 can feel like trying to predict the weather 20 years from now. But there are certain numbers we can confidently estimate today.
For instance, your mortgage may be paid off by the time you retire or perhaps it will only have a few years remaining. Either way, it’s essential to factor in related costs like property taxes and insurance, which continue regardless of the loan status. These costs are built into our worksheet and serve as a framework to estimate your baseline expenses with clarity. It’s also worth noting that while your mortgage may stay the same, things like property taxes and insurance premiums tend to increase over time. That’s why our worksheet helps you illustrate these categories individually so we can apply inflation rates appropriately and accurately.
Living Expenses vs. Lifestyle Goals
Another important distinction: Living expenses are not the same as your future goals. Below, please find a few expenses that don’t fall under your day-to-day costs but are still vital to plan for including timing, inflation and frequency.
🎉 Celebrations
✈️ Travel (especially early retirement adventures!)
🎓 College or Private School support for children or grandchildren
🏡 A new home or major home improvements
🎁 Gifting strategies or charitable donations
💒 Weddings
🛥️ Major purchases like a vacation home or boat
💡 Starting a business
These are not monthly budget items, but they are life-shaping events, and each comes with a price tag. Some goals may even increase in cost more rapidly than standard living expenses, such as college tuition or healthcare needs. That’s why we list them separately in your financial plan so we can apply different inflation assumptions where appropriate.
Planning for Expenses That Disappear
Just as some costs increase, others drop off altogether in retirement. For example, many clients find that their:
🚫 Disability and term life insurance premiums end
🚫 Commuting expenses like gas and car maintenance decrease
🚫 Work-related costs such as dry cleaning or professional memberships fade away
🚫 Charitable contributions shift as they move from income-based giving to legacy-focused giving
By capturing these changing dynamics early in your plan, we can better forecast your retirement cash flow and adjust for scenarios like the death of a spouse, downsizing, or increased travel during certain phases of retirement.
What Happens When One Spouse Passes Away?
It’s a difficult scenario to imagine, but it’s important to plan for:
- What would your expenses look like if one spouse passed away before the other?
While many couples are close in age, it is uncommon for both spouses to pass in the same year. Even when both partners are healthy and of similar age, we must consider the possibility that one will live alone for several years. That time between the first death and the surviving spouse’s own life expectancy, can come with financial changes. Some expenses may decrease, such as food and entertainment. Others, like healthcare or help around the house, may increase.
When we do not yet have detailed information, we typically model a 20 percent reduction in base living expenses after the death of one spouse. We use 80 percent of the household’s expenses as a placeholder. While it is not perfect, it gives us a more realistic projection for the surviving spouse.
This is one of the reasons we do not treat your plan as a one-time event. We revisit your Financial Freedom Analysis regularly to verify whether past assumptions are holding true. If not, we adjust because life changes, and your financial plan should evolve right along with it.
Don’t Worry About Getting It Perfect
We know it won’t be perfect, and that’s okay. Financial planning is not about being perfect; it’s about being intentional.
Our planning software allows us to build in ranges, adjust assumptions, and run multiple scenarios. But we can only do that if we have a solid starting point. That’s what this worksheet gives us. It also helps us separate out what we call “core living expenses” from the discretionary or lifestyle-driven spending. The more accurate this initial input, the better our guidance will be when you’re evaluating when to retire, how much you can spend, or how much to save and invest today.
Ready to Get Started?
Your Living Expense Worksheet isn’t just a form; it’s a tool to shape your future. Take 20 to 30 minutes to sit down, walk through the categories, and give yourself a clearer picture of your future life. If you have questions as you go, we’re just a phone call or email away. We’re here to guide you, every step of the way.