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I hate budgets
Let’s start by saying I hate budgets. This is mostly because they seem confining and tell us what we can’t do. That being said, some kind of budget is necessary in retirement, so it is worth the effort. At this point I should probably mention my usual disclaimer. I am not a financial advisor, and nothing I say should be considered financial advice. And as usual I do want to get you thinking of options outside the box.
One way to look at budgets that might make them a little more palatable is to look at what a budget says you can do versus what you can’t do. By making a budget and then making adjustments you really might be able to plan that dream travel or pick up some supplies to start that new hobby.
Lots of good websites out there – Frugality is perfect for a “real” retirement
If there was ever a time when frugality made sense it is when you are retired or approaching retirement. All those frugal ideas are even more reasonable when you approach them in light of the lessened time restraints that retirement hopefully provides. Things like fixing meals, fixing your own car, or fixing your own house are just a little more possible.
Luckily you don’t have to reinvent the wheel when it comes to frugality, and either do I. Below are a few websites that I have found useful. There are of course many more. A little searching on Google will find many. Follow a few and see which ones resonate with you.
http://www.TheSimpleDollar.com
If you really want an eye opener here are a couple more that take frugality to a whole new level. In their case they are talking about very early retirement, but the principals remain the same.
http://www.MrMoneyMustache.com
http://www.ExtremeEarlyRetirement.com
I’ll do a review of some of these sites in the future.
Let’s look at a possible starting point for a budget. Start with a piece of paper with two columns. On the top of the first column put “Now”, and on the top of the second “Retirement.” The idea is to compare your current expenses with your after retirement expenses.
What are you spending before retirement?
Start by looking at your checking and credit card statements and breaking all your expenses down into categories. These go in the first column. You might have Mortgage, Electric, Groceries, Phone, etc…
Once you have accounted for all your current expenses it is time to start thinking about what changes.
What items likely go away or go down?
Some things are likely to go down or even go away. For example you might not need as much in the way of business clothes, or your commuting costs might go away or get smaller.
How are things likely to change as you get older?
As you get older your money needs are likely to change. You might spend more on medical care, but less on entertainment, for example.
How are you doing with your budget?
We haven’t even talked about income yet, but how does that change? You might need another sheet of paper with your current income sources on one side and your expected after retirement income sources on the other.
Make your budget fit reality?
Then the real fun starts. How close are your retirement expenses to your income? Are you in good shape as is? If so, great. If not, don’t panic. There are lots of strategies to get things in line.
Obviously we have only touched the surface here of a very complex topic. More on budgets to come in future articles.
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