Budgeting for Retirement

someone holding piggy bank

By Katie Selph

We all look forward to retirement. No work and all play, right? Not necessarily. It’s important to be ready for retirement—not just ready to relax, but financially ready. Create a budget before you retire to ensure you can live comfortably on the money you have.

To make a budget, you need: Last year’s tax return, the last 6-12 months of bank statements, the last 6-12 months of credit card statements, and the last two pay stubs for yourself and your spouse, if you are married.

fall scents for your home

Next you need to make note of your required monthly payments:

  • Essential payments: clothing, food, transportation and health care. Make note of how much you must spend on essentials and account for these.
  • Nonessential monthly payments: Nonessential payments are for things we want but don’t need to have. Make note of gym memberships, cell phone bills, cable bills and any other subscriptions you may have.
  • Nonmonthly expenses: These are bills that come up every few months or annually, like home warranties, property taxes, insurance premiums, etc.

Determine What’s Necessary

Create a spreadsheet with your usual weekly and monthly expenses. Seeing your costs laid out across one chart can help you wrap your mind around your finances, and tracking your monthly budget will save you money in the long run.

Once you have laid out precisely where your money is going, you can decide what is and isn’t important. For example:

  • How much do you spend on groceries? Most people can cut costs here. Most grocery stores have their own brand for everyday items. You can usually save on the same product with a lesser-known brand.
  • Personal care expenses such as haircuts, clothing, personal hygiene. Do you really need that expensive shampoo? Pantene Pro-V Shampoo is $4.79 a bottle, whereas a salon brand like George Fekkai is at least $20.
  • Things like rent and mortgage payments are essential, but you can trim your electric and gas bills.

Do Additional Research

When making a budget, include changes to insurance policies and other new expenses. While employed, you probably had different insurance premiums, coverage and fees. Research your health care options during retirement and the cost of using various providers.

Fixed vs. Flexed expenses

Flexed expenses are expenses for fun things like travel, cell phones, club memberships, etc. Once you’ve calculated fixed expenses, look at how much you have left over to go toward your flexed expenses. Comparing the two will allow you to decide where you want your money to go during retirement.

How much of your flexed expenses are going to cable or streaming services? Do you have to give some of them up? Not necessarily. Products like Roku eliminate the need for multiple streaming services. Roku connects through your Internet and gives you access to streaming sites like Netflix and Hulu and eliminates the need for cable.

Build Your Retirement for You

Get the most out of your retirement by creating a budget and implementing it. Knowing your costs ahead of time will help you plan what’s possible and what isn’t. Evaluating your flexed and fixed expenses will allow you to budget appropriately. Maximize your retirement and plan for a bright future.

Katie Selph is a freelance writer living in Phoenix. She attended the University of Arizona where she received a Bachelors degree in Creative Writing. She currently does marketing and communications work for The Phoenix Chorale and Mesa Arts Center. She has a passion for writing, arts organizations and nonprofit work.

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Budgeting for Retirement
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