You’ve made it. Retirement has arrived, and you get to do the things you’ve always wanted to do but for which you didn’t have time. However, retirement can last 2-3 decades, which means your money will have to last the duration of your life to make your dreams a reality. Here’s how a budget in retirement can make all those dreams a reality.
Know How Much You Have Coming in Each Month
The first key to making a retirement budget is knowing what income you have coming in each month. You need to list all income sources, such as:
- Social Security
- Distributions from Pension/401(k) plans
- Distributions from IRAs
- Investment income
You may have other sources of income, and that’s fine. The key is to know how much you bring in each month.
Watch Your Expenses
Expenses are the other key part of a budget in retirement. If you have the same income each month, expenses are important to monitor as they can erode what you have leftover for the fun stuff.
Expenses include known expenses like utilities or mortgage/rent and fluctuating expenses like eating out or other entertainment costs. If you don’t know how much you spend in a month, write down everything you spend over the course of the next month. This will help you see where your money goes and identify potential savings opportunities.
Liquidity is Important
Investments in the stock market are important, but liquidity is just as critical when you’re in retirement. Liquidity usually comes in the form of an emergency fund. Most experts recommend you have at least 3-6 months of expenses saved for a rainy day.
You may also want to have additional savings to cover large expenses like replacing a furnace or a roof. You don’t want to add debt in these situations, nor pull money from investments. Liquidity allows you to handle unexpected circumstances without impacting the things you want to do. A savings account, like the Four Points Savings Account, can give you the peace of mind that you can handle whatever comes your way.
Budget for Fun
A budget should allow for one thing – freedom. It gives you the freedom to spend around your goals and interests. This pairs well with the much-deserved freedom you enjoy in retirement.
Many retirees fear they’ll run out of money in retirement. That’s an understandable fear, but a budget can ease those fears as it provides a plan to spend money in a way that best meets your needs without sacrificing too much.
In short, a budget helps you chart a course for the kind of life you want in retirement.
What questions do you have about making budgets? What are you experiencing now that you’re in retirement that you didn’t plan for or expect?