Budgeting for Retirement
Ask the Grooming Tutor
By Michell Evans
“Hi Michell. I attended some of your classes at the Northwest Grooming Show! Thank you for teaching a class about retirement. I am not very good at following a budget but you really got me thinking about how little time I have to get ready for retirement. How much money do I actually need?” –Gloria
Hi Gloria. My segment about retirement was disguised as a rejuvenation class. I am not sure I would have gotten attendance from the younger crowd if I called it “Preparing for retirement”. It’s sad, because it is so much easier if you start when you are young.
I think that retirement is a necessity, not a luxury. Grooming is physical labor and the older you get, the less likely you will be physically able or mentally willing to do it. Now is the time to save and invest!
From 20–50 years old your body heals and recovers pretty well. Each day you tax your body a little and the next day you are all healed up and ready to go again. As you age, your cells slowdown in their recovery at a noticeable rate. In women, menopause plays a roll, but in all genders we simply regenerate slower as we age. It’s not that suddenly at 50 we slow down—it’s more that at 50 we feel we have earned the right to admit it. Accumulated injuries and genetics play a role in our physical limitations as well.
Everyone needs enough money to support themselves for at least 30 years with no income, other than Social Security. I am basing this on retiring at 65 and living to be 95 years old. It is true that you may not live that long, but what if you do? And what if you accidentally live until you are 105—who pays for that?
Just how much money does it take to pay for your life from 65 to 95 years old? Well, it’s at least a million dollars! Three thousand dollars per month for 30 years equals one million, eighty thousand dollars. Of course, everyone’s budget is different. You may be planning to live with your adult children. Or maybe you have a spouse with a pension—lucky you! Very few groomers get a pension.
Another idea is that you can have one million dollars in an account earning 5% and live off the interest. The interest, at 5%, is $4,166.67 per month. In this case, you still have a million dollars when the time comes for you to depart. Either way, the number is one million dollars!
Maybe three or four thousand dollars per month is too little, or maybe it would be comfortable. Only you can make that determination based on your bills and desired lifestyle. Keep in mind that over the course of 30 years, there will be a lot of inflation. So, at first you might be comfortable, but toward the end of that 30 years you may struggle to pay your bills. This is why the latter plan would be a safer bet because you can dip into your mil if needed.
Hopefully your home is paid off or, at the very least, your living arrangements are taken care of or factored into your retirement budget. Your home will need updating and repairs in those 30 years. Some of your medical bills will not be covered by Medicare and therefore your supplemental Medicare insurance. Not to mention, you will most likely need a new car in those 30 years. The list goes on as life goes on.
At 50 years old the IRS allows you to invest a slightly larger amount into your various IRAs. They call these catch–up contributions. Absolutely take advantage of this if possible. So, imagine at 50 years old your body is struggling to work full–time as a groomer, yet the anxiety of retirement approaching is ever present. The government now says you can invest even more, yet you find it hard to earn the way you did when you were 35 years old. Maybe you could groom 6–10 dogs per day then, but now you find it hard to recover from 6.
Don’t underestimate the power of a healthy lifestyle. Regular exercise is the key to good health. It seems counter intuitive, with grooming being such a physical job, one might think that exercise is already accomplished in the course of the day. Not so. Cardiovascular exercise combats heart disease, lowers cholesterol, lowers blood pressure, regulates blood sugar, reduces asthma symptoms, regulates weight, strengthens the immune system and reduces the risk of falling. Thirty minutes of moderate cardio five times per week may help keep you grooming for years to come. Also, you are what you eat. A healthy diet will help your cells regenerate so that you can continue to produce haircuts that will carry you to retirement.
If you start saving and investing at 20 years old, $22,222.22 is the amount per year to save for your million dollars. This equals $1,851.85 per month, and this is assuming you will work until you are 65. At 30 years old, the number is $28,571.42 per year. At 40 years old it is $40,000.00, and at 50 years old it is $66,666.66. Keep in mind that there is much interest to be earned, so maybe you could cut a few thousand dollars off of that number each year. Plus, it compounds, so the more money you have invested or saved, the more interest you earn.
I find that 30—50 years old seem to be the most productive grooming years for most groomers. These are the years to pack the money away! Why not save while you are young so that when your body slows down, you can groom part–time and still be on track for your million–dollar retirement.
The price of your services must include the cost of retirement! Our industry is grossly underpriced. In many cases, it is not all about low prices, but also bad spending habits. Consider half of your retirement could be money that is otherwise spent unnecessarily and the other half is paid for by a price increase.
Over the course of 30 years, a groomer who grooms 6 dogs per day will groom about 54,600 pets. In order for those pets to pay a half a million dollars toward your retirement, the owner needs to increase each pet’s price so that you make an additional $10.00 per pet. The price increase also needs to include appropriate compensation to the owner’s retirement figure. The owner’s required price increase depends on many factors.
In order for your prices to exceed your competition’s prices, your skills must exceed your competition’s skills. Certification is a great place to start! Work hard to be the best in your area so that you can save for your retirement with relative ease. Also, when creating a budget, retirement must be one of the primary expenses from day one.
I am glad that you have been awakened to the monumental task of preparing for retirement. Get started! —Michell
Have a question you want Michell to answer? Please send questions to [email protected]