The Importance Of A Retirement Budget
Financial strains are psychologically easier during our working years because we receive a stream of income. If that income does not match ones expenses and there is a financial pinch, cash flow adjustments are made. Budgets are refigured, spending is cut and if possible we work some overtime hours to make up for any monetary slack.
Once you fully retire though the financial picture changes; finances become a psychological strain. Once fully retired you lose the ability to work extra hours to increase your stream of income. Unless you plan on working during your retirement years, your main source of income will be your pre-retirement investments and if lucky, maybe some social security benefits. Living on a retirement budget becomes so important during your retirement years because of that change in your cash flow.
Predictable, Unchanging Expenses
Expenses during your working years are fairly predictable; they include housing, transportation, utilities, food, clothing, insurance, the costs associated with schooling for your children and entertainment. Other than occasional increases to the cost of gasoline, the price of groceries or the cost of insurance, these types of expenses are common during your working years.
Retirement Expenses Equalize
When you retire you will be able to eliminate some expenses but have to add others. By the time you are retirement age, your children will be on their own; save money on the cost of food, housing, insurance and utilities (downsize). If you decide to not work during your retirement years you will save money on the cost of transportation, insurance and clothing. The expenses that could increase include medical and entertainment. There will be a tug-of-war for your money in retirement; which is why you should strongly work on your retirement budget.
Your Retirement Budget Starts Before Retirement
Worrying about your money when you retire does not make for a joyous retirement. If you want to make sure your retirement income will cover your retirement expenses, your best bet is to practice living on a retirement budget, before you retire. Get to know your expenses more personally. Write down every dime you spend for 12 months prior to retiring. Compare that to your forecasted retirement income. If your expenses will exceed that income, learn which expenses you will be able to cut in retirement or plan on working during your retirement years.
If you want to stay retired once you are there you better be certain that you can live with a retirement budget.