Everyone pictures retirement differently. For some, it’s the opportunity to travel the world and experience new things. For others, it’s helping with the grandkids and staying close to home. No matter how you picture your retirement, one notion will always ring true – every day is a Saturday.
Many people don’t realize that expenses can quickly rise in the first few years of retirement. For that reason, it’s crucial to adequately prepare for your retirement and develop a budget that will allow you to experience the things you were forced to put off during your working years while still spending in a responsible way.
No one wants to outlive their money, so – whether you intend to spend your last penny on your last breath or leave as much as possible to your heirs or charity – budgeting for retirement is critical for stability and contentment. Therefore, abiding by a few simple rules can significantly enhance how well your budget will serve you throughout your retirement years.
A reliable retirement budget is one that’s built on solid and valuable information. The first step in creating your retirement budget should be to gather all pertinent information, including your account statements, bills, and anything else that might be of use. Go back at least six months, if not a year, to get a good idea of the average figures, so your budget isn’t skewed. This is especially true if you live in a seasonal state or work in a seasonal industry where your income or expenses can ebb and flow according to the season.
From there, you will want to create a budget or spreadsheet that will organize all of the information into a concise and insightful document, preferably on your computer or mobile device for ease of use, but paper will suffice as well.
Have a Heart-to-Heart Conversation With Yourself
As the old adage goes, there’s a big difference between needs and wants. When income is more constrained during retirement, it’s essential to differentiate between what you absolutely need versus what you would prefer. In other words, water, electricity, and healthcare are fixed, nondiscretionary expenses, but you don’t necessarily need the sports package from your cable provider.
Of course, after a lifetime of work, retirement should be a time for you to enjoy life and not constantly pinch pennies. Therefore, sit down and prioritize any extravagances you don’t necessarily need but would enjoy. Those are the types of items that should be included within your retirement budget for entertainment and general enjoyment.
Prepare Your Budget
Once you’re properly organized and have identified and prioritized extraneous but essential expenses, start preparing a simple budget with your income and fixed expenses. Consider the resulting amount the flexible portion of your budget that can now be devoted to savings or spent on traveling, hobbies, entertainment, or however you deem fit. Once you have a working template in place, remember that your budget should be continually revisited to ensure it’s accurate, informative, and based on the most current data possible.
Would you like help to build out a budget for yourself, or need help with your financial plan? We’re here to help! Simply click here or call (763) 445-2772 to schedule a complimentary consultation today!