Welcome to the world of baby boomer retirement. I retired about a year ago. When it comes to the budget, some things I have done well, others have been difficult lessons to overcome. Here is a list of tips that I have developed maneuvering through this first year of retirement.
Plan Your Budget Far Before You Retire
Establish a comprehensive budget prior to retirement, and follow it. Be sure that, on a monthly basis, income will exceed expenses. Plan your budget monthly, for one year at a time. Account for periodic expenses, such as quarterly insurance payments, semi-annual property taxes, annual taxes and vacation trips. If you are not used to writing and following a strict budget, seek the advice of your accountant or personal banker. There are other sources available, such as free advisers at local senior centers. Make sure your budget is realistic and that your income can cover all the planned expenses.
If you are married and this is a joint budget, be sure that both of you understand the importance of the budget and agree on the plan. In this case, communication is the key to establishing and living with the retirement budget.
Review the budget monthly, and adjust where necessary or possible. For example, your insurance rates may go up, so make sure you can adjust down in another category such as entertainment.
Live Within Your Means
Retirement plans are as varied as the individuals who are retired. Make sure you understand your specific financial position. Are your living on a fixed income, such as social security? Do you have an annuity? Is part of your income coming from savings interest? Are you depending on mutual bonds or stock dividends?
The income side of your budget should take into account only fixed revenue. Do not include payments that may fluctuate or be lost, as in the case of a stock market drop. The income that is generated from fluctuating sources should be placed in special funds, such as a hedge against emergency situations or extraordinary expenses, as an example, for a vacation cruise.
Keep Saving for Those “Rainy” Days
When you budget, be sure to include two expense categories: (1) Miscellaneous Expenses, for unexpected items under $500, such as emergency trips, wedding gifts, replacement of appliances, broken computer or vehicle repair; and (2) Urgent Expenses for items over $500, for expenses such as additional medical expenses, major vehicle repair or replacement.
If your income is fixed, budget at least 10 percent of your monthly income to a special savings fund for these items. If you have other revenue sources, move those payments over to the savings account for these items.
Keep Massaging Your Budget
Once you have established a budget that you can literally live with, keep track of all the expenses and income on a monthly basis. See where you can save more, spend less, and make an adjustment accordingly. Start planning for your next annual budget about September of each year. Use your current year as a track record, plan your expenses as if they will increase by 10 percent and your income will remain static.
Tips for Lowering Expenses at Retirement
I have found it entertaining to look for ways to cut back on expenses, and it has become like a game – a very important financial game.
Senior Savings: If you look for special senior plans, you can save a bundle of money. My husband and I can save on tickets to major events, early dinners at restaurants, passes to National Parks, AARP discounts, and a number of other ways. Sometimes you have to ask, other times they are advertised. Be sure to have your identification handy for proof of age.
Electronics: When I was working I needed a cell phone plan and it was very expensive. After retiring, I barely use the cell, so we traded in our $110 a month plan for a prepaid cell phone that requires only $25 each three months, with plenty of time rolling over.
Groceries: Now that we are retired and have they time, we check all the weekly grocery store fliers and shop accordingly. We save about $100 a month on groceries.
Car maintenance and repair: We have signed up with area automobile sales and services companies, and they send us special sales fliers. This month we bought an excellent full set of tires for $100 less than the nearest competitor, just by shopping and checking the Internet fliers.
Senior safety: Taking (and passing) the senior Driver Safety Program saves us $100 a year on our automobile insurance. You can take it online through AARP, at local community colleges or nearby community centers.
Retirement is Serious Business
Treat your retirement like a serious business, with a comprehensive budget and financial considerations, and you should do just fine. Enjoy your retirement – like a friend of our says, “It’s like Saturday, every day.”