Originally seen in USA Today
***Note: If you want to retire successfully but are starting from scratch at age 50, you need a plan. This is the second of a four-part series on how to make it happen.
As the story goes, a young woman prepared the same holiday meal for her family every year. As always, she followed her grandmother’s recipe to a T. She’d buy a 5-pound ham, cut off 4 inches from one end of it, and then place it in the oven, following the time and temperature guidelines on the recipe card. After 10 years of preparing this crowd-pleaser for her family, the woman finally asked her mother about the significance of trimming 4 inches off the ham, saying that it seemed wasteful.
“Oh, honey, it’s because grandma didn’t have a big enough roasting pan,” her mother explained with a chuckle.
At age 50, there’s a reason your finances are the way they are. You spend X amount on groceries, Y amount on housing and transportation, and Z amount on gifts and vacations. But it’s likely you don’t remember why. Habits are that powerful.
You may be making the same nonsensical decision for years before realizing it didn’t make sense, it doesn’t make sense, and it won’t make sense for you to keep acting in the same manner.
If you want to retire successfully, even when starting from scratch at age 50, you must ask yourself why, over and over again. Why do you spend what you spend?
Your current financial standing (circumstance withstanding) is a product of bad answers to the question of why. Alternately, the problem might be you’re not asking the why question correctly.
For example, asking, “Why do I spend 16 percent of my income on transportation?” may not be as good a question as, “Why do I spend 16 percent of my income on transportation when I have nothing saved for a looming retirement date?” Simply additional context to the question can make all the difference.
A more relatable example: The amount of toilet paper you use normally is different from the amount of toilet paper you’ll use when it’s the last roll in the house. Context matters.
The money you earn now is a (small) part of what you will earn for the rest of your work career. It needs to be treated that way. A finite amount of income requires a more nuanced approach. Your current lifestyle must shrink.
By now, most Americans are pretty hip to the importance of saving for retirement.
Remember, your lifestyle will eventually have to shrink once you retire. I’m suggesting you just do it now. Live your retirement lifestyle right now. I’m talking about restricting your spending now to match your projected retirement income levels.
Once you truly understand your reality, pressing reset on your financial life will be exhilarating. Grab your budget. It’s time to ask yourself “Why?” the right way.
If we are following the plan that was outlined last week, you need to cut overall spending by at least 10 percent. It doesn’t matter whether you do this by cutting spending equally in each budget category or you manage some form of give and take between categories. Trimming 10 percent from categories like food, clothing, and entertainment will be relatively easy, while categories like housing, transportation and education will be much more difficult. And then there’s health care and utilities which, frankly, seem impossible to curb.
Having been presented with this direction, one of three things will happen next. The first possibility is you will choose to shift your spending in several small areas such as food and shopping. The second involves you hitting a giant reset button. People who choose this path move to a less expensive home, get rid of their relatively expensive car and destroy every other impediment to wealth-building. The third option — inaction — is the choice I dread.
Being broke at 50, no matter how you got there, isn’t sad, shameful or telling on its own. Giving up and accepting your current reality as your permanent reality is a sad ending.
Next week: You want the actual numbers to prove all of this plan is possible. You’ll get them as I show you how your greatest asset (your income) can turn into an asset that produces income.
Missed part one of the series? Click here to see When starting a retirement plan at age 50, eliminating debt is the first step.

Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.