With only one-third of Americans keeping a monthly budget, it is safe to say that too many people are entering retirement unsure of what the future has in store for them financially.
Do you have a budget? If you don’t, I’m not surprised, but you should have one and here’s why. When you retire you stop receiving your normal paycheck, you can no longer pick up a few extra hours here and there to pay for unexpected expenses. Additionally, a fixed income has to last an indefinite amount of years, and a minor adjustment here and there can save you tens of thousands of dollars over a lifetime.
As we’ve addressed in many of our previous posts, the average life expectancy is growing older each day meaning your retirement income needs to last longer as well. If you don’t plan for that you run the risk of outliving your retirement nest egg. One way to tackle this obstacle is to make a budget.
As a rule of thumb, it is assumed that you can live off of 70% of your preretirement income during your retirement years, but as most things go in life, this doesn’t hold true for everyone. Some retirees need the same monthly income they did during their working years and some need even more – without budgeting and planning for retirement you might come up short when you need it the most.
Points to Consider when Making a Budget
- Your lifestyle: evaluate the type of lifestyle you are expecting to maintain and how it may differ from your current situation.
- Expenses: evaluate your short and long term expenses including things like travel and medical costs.
- Debt: if you have debt going into retirement make sure you include paying that off in your budget. If you don’t have any previous debt, a budget is a great way to plan for expenses and save for a rainy day so you never have to take out a loan.
Budgeting Creates Peace of Mind
Budgeting for retirement is about creating a balance between your spending habits and your income streams. Creating this balance will give you a sense of control leaving you with peace of mind in your retirement years.
