10 Ways Your Spending Habits Could Be Jeopardizing Your Retirement

Time is one of the most important ingredients in the recipe for a financial plan. Earning and saving money is important, of course, but Father Time can add rocket fuel to good financial habits.

Since the time component is critical to your finances, it’s equally important to recognize that your financial decisions now can affect your retirement later. Many people view their spending habits completely differently from their saving and investing efforts, assuming that spending affects you today while investing and saving help you later down the road. However, they’re very much related.

We’ve compiled the 10 most common spending habits that can affect retirement planning. This list is not inclusive. If you’d like to review your spending habits and see if your retirement planning and spending habits are on track, contact us! Schedule a no-obligation conversation with the team at Scarborough Capital Management. The more people we can help, the better!


Let’s talk. If you have a question about your future, contact Scarborough Capital Management and get the conversation started.


1. Poor Mortgage Management

To start the list, let’s start with one of the most important purchases in your life – your home. A home purchase can be very gratifying and can be a great investment for your family. However, closing on a new home is only the start.

It’s important that after you make your purchase, you monitor your payments and interest rates properly to build equity efficiently and turn your home into a true asset. Given the significant expense often associated with a home purchase, making sure to monitor your mortgage and any associated costs is a good idea.

To build equity a bit faster without necessarily increasing your out-of-pocket expenses, talk to your financial advisor about making your mortgage payments twice a month. This can mean less money going to interest, and more money going to your principal.

2. Keeping Your Original Interest Rates

Depending on the interest rate environment when you take on new debt, there may be a better deal later on. This includes your mortgage. If you purchased your property (or properties) when rates were high it could be a good idea to talk to a mortgage professional about refinancing options.

A small interest rate change can go a long way. On a large debt like a home, reducing your interest rate by just 0.75 percent can mean thousands of extra dollars a year in savings. Over time, this can be new savings or additional cash flow you can use during retirement.

3. Leaving Your Student Loan Payments on Autopilot

There are discrepancies on whether student loan debt should be classified as “good debt” or “bad debt.” "Good debt” is defined as money owed for things that can help build wealth or increase income over time, such as mortgages or business loan. "Bad debt” refers to things like credit cards or other consumer debt that do little to improve your financial outcome. Your long-term payment plan is where the answer lies. Paying too little on your student loans over time and leaving them on autopilot could make it a “bad debt”.

It’s tough to control your student loan interest rates, but you can certainly control the amount of your payments. Depending on the duration of your loan, increasing your payments by 10 to 20 percent can shave years off your payoff calendar.

4. Carrying Credit Card Debt

Proper debt management is a crucial component of good finances. For as much financial advice as there is that warns about the dangers of credit card debt, the average American household still carries more than $7,000 in credit card debt, totaling $413 billion!

Keeping up with Joneses, or having expensive tastes, can sometimes cause people to spend unnecessarily. But it’s important to keep your spending habits in order. As of November 2020, the average APR charged for credit card accounts that incurred interest was 16.28%, according to the Federal Reserve. From a portfolio standpoint, an investment securing 10 percent a year would be a fantastic find. Therefore, this amount of interest working against you can deteriorate your retirement savings.

Read our recent blog post: Scarborough Debt Counseling: 5 Ways You Should Be Using Credit Cards.

5. Paying Late Fees

As a financial advisor in Annapolis, late fees are a pet peeve. Depending on what bill is being sent late, the penalty can be costly. When there are multiple late charges, you can be looking at a big chunk of change.

Get organized. Sign up to pay your bills automatically if that helps. Any money wasted on these types of fees could be instead put toward your future. Instead of draining your checking account, the money could be used as extra padding in your retirement!

If you have a lot of debt, read our recent blog post: A Financial Advisor’s 10 Tips to Reducing Debt.

6. Buying New Cars

Though cars may be a touchy subject for some, constantly buying new cars could impact how soon you can retire, and how much money you have in retirement. If you are constantly buying new cars and financing them, you could be making $300 to $500 a month in payments, plus the cost of insurance, registration, and maintenance – potentially several thousands of dollars a year.

7. Paying for Unused Memberships and Subscriptions

Another common problem when it comes to people’s spending habits is paying for things that are not matched with value or usage.

It’s extremely important to stay active and manage your health, especially in retirement, but the cost of an unused gym membership can turn into your own personal tax if used infrequently or not used at all. This phenomenon is more common than you may think: 63 percent of gym memberships go unused, making the afterthought of exercising an unnecessary expense.

The same goes for other subscription services. Magazines, streaming services, club memberships, and the like that go unused can burn a hole in your pocket over time. Make sure that you actually use anything you sign up for and spend money on. If not, cancel it!

8.Paying ATM Fees

Another pet peeve as a financial advisor is ATM fees. Paying to take out money at a convenience store as opposed to an ATM may be a life-saver one or two times. But if you’re regularly paying these fees, it’s really like throwing money in the garbage. The charge might just be $5, but even they can add up!

If you experience these fees often, change your habits. Instead of running into a 7-11 to pull out cash from the ATM, request money back when grocery shopping (typically free!) so you have cash on hand.

9. Eating Out and Food Delivery

While the pandemic may have significantly decreased restaurant patronage, eating and having your food delivered can also cause cashflow leakages. There’s nothing wrong with eating out if you can afford it. But daily trips to a restaurant today can mean fewer restaurant visits in retirement.

Taking it a step further, people who dine at home are able to incorporate healthy eating habits, leading to better weight management, and maybe even lower healthcare in the future. If you are looking for new ways to save money, put a limit on the number of restaurant visits or food delivery purchases you make.

10. Not Working With a Financial Advisor

Working without a financial advisor may seem like a cost savings. Industry studies estimate that professional financial advice can add between 1.5% and 4% to portfolio returns over the long term, depending on the time period and how returns are calculated.1 Along with getting higher returns than do-it-yourself investors, they are usually more likely to avoid big investment mistakes and put more of their income into savings.

For example, at Scarborough Capital Management, our financial advisors offer ongoing investment management, while looking at your full financial life to make recommendations. We help our clients become wealth accumulators. Effective wealth accumulators are not necessarily that different from other people. What they do have, however, is a carefully planned strategy and the discipline to execute it consistently.

Over time, be sure to keep an eye on your spending and overall financial habits. All of your expenses, big or small, can contribute to the quality of your retirement. Remember, you wield the power now to make your Golden Years truly golden.



Value of advice sources: Envestnet, Capital Sigma: The Return on Advice (estimates advisor value add at an average of 3% per year), 2016; Russell Investments, Envestnet, Capital Sigma, The Advisor Advantage (PDF) (estimates advisor value add at an average of 3% per year), 2019; 2017 Value of a Financial Advisor UpdateOpens in a new window estimates value add at more than 4% per year); Vanguard, Putting a Value on Your Value: Quantifying Vanguard Advisor's AlphaOpens in a new window® 2016, (estimates lifetime value add at an average of 3%); Morningstar Investment Management, The Value of a Gamma-Efficient PortfolioOpens in a new window, 2017, (estimates value add for a subset of the service identified in this paper at an average of 1.5% per year). The methodologies for these studies vary greatly. In the Envestnet and Russell studies, the paper sought to identify the absolute value of a set of services, while the Vanguard and Morningstar studies compared expected impact of advisor practices to a hypothetical base case scenario. Please follow the links above to see important differences in the methodologies of these various studies. 

This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Keep in mind that there is no assurance that the recommendations or strategies will ultimately be successful or profitable nor protect against a loss. There may also be the potential for missedgrowth opportunities that may occur after the sale of an investment. Recommendations, specific investments, or strategies discussed may not be suitable for all investors. Past performance may not be indicative of future results. You should discuss any tax or legal matters with the appropriate professional.


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