You don't need to cast your budgets in stone. The budget you create now will probably not be the same one you use for the next five or ten years. As prices rise, bills fluctuate with the seasons, debts are paid off, income increases or decreases and expenses come and go, it's wise to revisit your budget about twice a year. Whether you underestimated certain payments and need to add to your budget, or you paid off an expense and have money left over, it's a good idea to make any necessary adjustments to your budget on a regular basis.
Retirement can be exciting but challenging. No more waking up to an alarm clock and battling rush-hour traffic. But then again, no more expectation of a nice paycheck. Be sure to consult with a qualified financial advisor about your particular situation. By planning ahead and sticking to a budget plan, you will more than just weather retirement financially—you'll also enjoy it.
Establishing Sources of Income
The first shock of retirement may be the loss of the paycheck. To feel secure that you can rely on a stable income stream, it may be a good idea to calculate your entire monthly income from all the income sources you have, such as Social Security, pension, 401(k) savings, interest payments, alimony and investment dividends, to name a few. Also, checking your balance in your savings account to decide how much you can reasonably withdraw on a monthly basis can be a savvy planning tool. Adding all these up will help create the foundation of your budget plan.
Listing Fixed and Variable Expenses
Now that you've calculated the income, you can calculate the expenditures. One strategy is to collect all the bills you received for the last month. From these, make a list of all that are fixed monthly expenses, such as your mortgage, car payment, phone bill, cable TV and health insurance. Then you can estimate variable expenses such as grocery bills, utility payments, credit card payments or medical expenses. Remember to include periodic payments such as property taxes, car registration, car and home insurance bills and even a holiday fund. You can divide these expenses by 12 months to create a monthly payment if that makes the most sense for your situation. Another idea is to add up all your cash and debit payments for the past month. A rough total is probably fine, depending on your situation. Your financial advisor can help you with the calculations.
Allocating Income and Leaving Some Left Over
Now you can allocate your income for each of the expenses. Depending on your situation, you might want to spread payments throughout the month. Whatever money you have left after bills are paid is your discretionary income to use on entertainment, eating out, hobbies and the like. Leaving a little extra for emergencies is usually a good idea. And if your budget allows, you could use any leftover money to pay off debt. With discipline and practice, you can stick to a budget. The goal is to live within your means but also leave enough to enjoy life. A budget that is too strict will likely leave you discouraged.
You'd probably be surprised to find out how much money can slip through your fingers when you don't have a budget. During retirement, you may need to shop more frugally than you did before. To stay within your budget, there are many cost-saving techniques you can try. Shopping at discount outlets, buying store brands or off-brands and using grocery coupons are strategies that many have found helpful. Many stores offer print-out coupons on their Web sites, so don't forget to check online before you go, just in case. Other money-saving tips include saving on electric bills by shutting off lights in rooms you're not using, running appliances like the dishwasher and clothes dryer at non-peak hours, lowering the thermostat in winter, using public transportation instead of driving and eating at home rather than in restaurants.
Seeking Advice from Senior Services
With so many senior services programs already in place, there may be one that's right for you. You can try consulting senior services programs in your area for advice on getting the most out of available government and community programs for low-income seniors, such as Medicare, fuel assistance, utility assistance, subsidized housing, prescription drug aid, at-home nursing, food stamps and Meals on Wheels.