You’ve thought about it since you were young and now the time is finally here to enjoy your retirement. You’ll still have to keep solid budgeting principles in mind though as you begin this new phase of life. Budgeting during retirement can feel overwhelming, but with a few simple steps, you can manage your money and make the most of your savings.
Assess Your Income Sources
First, start by understanding your various money sources. Knowing how much income you have each month will give you a clear picture of your budget limits. Retirement income can come from numerous places, such as:
- Social Security benefits
- Pension payments (if applicable)
- Retirement savings (401(k), IRA, or Roth IRA
- Investments, such as stocks or rental income
Track Your Monthly Expenses
Take stock of your regular expenses and see where your money goes each month. Some key categories you should monitor include:
- Housing costs (mortgage, rent, or property taxes)
- Utilities (electricity, water, internet)
- Groceries and household supplies
- Insurance (health, home, auto)
- Transportation (car payments, gas, public transit)
- Entertainment and leisure activities
By tracking expenses, you can spot areas where you might be overspending and get a better sense of how much your income sources will need to cover you each month.
Recognize Needs from Wants
Another essential aspect of budgeting is distinguishing between must-have expenses and discretionary spending.
Your needs are your must-pay items, like housing, utilities, food, and healthcare. Your wants are items like vacations, dining out, and non-essential shopping.
Once you have your needs covered, then you can allocate some funds for fun activities, as long as you stay within your budget limits.
Plan for Healthcare Costs
Healthcare can become a significant expense during retirement, so it’s important to be prepared so the costs don’t derail your budget.
Consider signing up for Medicare and choosing the right plan for your needs. You can add supplemental insurance if Medicare doesn’t cover everything you need. You can also build an emergency fund specifically for unexpected medical expenses.
Limit Debt and Credit Card Usage
Carrying debt into retirement can put unnecessary strain on your finances. Start by paying down any remaining debts before or early in retirement. If you do use credit cards, use them only for planned purchases, and pay off the balance each month to avoid high interest fees. By avoiding new debt it allows you to focus your income on living expenses, savings, and discretionary spending.
Take Advantage of Senior Discounts
Many businesses offer discounts to retirees on things like groceries, travel, and entertainment. Always ask if there’s a senior discount available—it can add up to significant savings over time and give you more funding for your fun expenses!
Review and Adjust Your Budget Regularly
Your financial situation may change over time, so it’s a good idea to regularly revisit your budget. When you do, be sure you:
- Adjust your spending as needed to reflect changes in income or expenses.
- Monitor any new sources of income, like part-time work or rental income.
- Stay flexible so you can maintain your lifestyle without financial stress.
Space Age Credit Union has many resources available to you in retirement, including checking and savings accounts. Find out how we can support your retirement goals today.
