Even if you’ve been a staunch money manager your entire life, you’ll find that the name of the game drastically changes when you hit retirement. Income and expenses are different. The goals are no longer the same. Virtually nothing is the way it used to be.
In many ways, retirement money management has the potential to be a lot easier than it was before due to the predictability it brings. However, this is only true if you are smart with your money and can manage it efficiently. Shift your perspective on money management and enjoy your retirement.
- Establish a Retirement Budget
The first step to any money management system is establishing an ironclad budget. Without it, you won’t have an accurate picture of how much you’re spending and how your spending habits relate to your income. Establish how much you can spend for a month, inventory all of your expenses, and make sure things line up. If the leftover money is less than what you desire, you might need to make a few changes.
- Contend with Looming Debt
Debt is a huge problem during retirement – it weighs down people living on a fixed income. If you’re entering retirement with debt, you should impose two goals. One is to pay off the debts you currently have and close paid up accounts. The second is to avoid procuring new debts. Figure debt payments into your financial responsibilities. You may be able to negotiate debts down to lump sum payments or payment plans that can significant reduce the total amount owed.
- Scale Back Fixed Expenses
How many things do you absolutely need to pay every month? Utility bills are a must, but they may not be the only recurring payment you’ve been blindly paying. Have you forgotten to cancel any gym memberships or subscription services you’re barely using? Do you really need an extensive premium cable package, or will a single monthly subscription (like to Hulu or Netflix) meet your needs? Keep your monthly obligations to a minimum.
- Establish an Untouchable Savings Account
Change the savings account you currently have if it isn’t a high yield account. You can also opt for a long term certificates of deposit if a savings account feels too tempting to touch. Put a large sum of money into a high yield savings account or CD, and let it sit there. Even if it only gains a few hundred dollars a year, your savings is making money for you. Savings accounts are better than CDs for people who want to be able to easily access their money in the event of an emergency.
- Downsize or Re-Strategize
Housing accounts for a large expense, especially if you aren’t done paying off your mortgage. You can sell the home and downsize to a smaller place. If you’d like to stay where you’re currently at, you might qualify for a reverse mortgage. Instead of a mortgage payment, you’ll receive small payments proportionate to the equity of your home every month. Many retired people qualify for reverse mortgages, especially if they’ve paid a significant amount into their mortgage over the years.
- Change the Way You Shop
Adopting a thriftier attitude in your retirement will help your money go further. It might also come with health benefits – if you cut junk food or fast food out of your budget, it’s much easier to eat better. Buying used instead of new can help keep clothing and furniture costs below budget. Changing where you buy your groceries or utilizing more coupons can shave a substantial amount off the top of your budget.
- Pull Back Some Lifelines
Friends and family (especially your children) may periodically come to you looking for loans or financial arrangements. Sometimes, these decisions are advantageous to make. Some cellphone carriers reduce bills when multiple people join the same plans, and arrangements like these will save everyone money. You should, however, be careful about loaning out money or adopting other people’s financial responsibilities.
- Utilize Senior Savings
It’s amazing how many stores and entertainment venues offer senior discounts. Nearly every eating establishment offers some sort of a senior discount (or a free drink at the very least). Some grocery stores offer a general grocery discount to seniors. Certain discounts can only be used on certain days. Make a list of the places you would usually shop or eat and compile the discount information. Build your schedule around when you can get the best deal.
- Invest Where You Can
Retirement typically means living on a fixed income. It’s hard to get more money than your predictable monthly income, whether it be from a retirement account or a social program. Short of picking up work, investment is the only way to make more money with the money you have. Some people prefer to invest in tangible things, like land or gold. Others prefer to invest traditionally. Whichever way you choose to invest is up to you and your personal level of comfort with a prospective investment. Just be sure to read and research as much as possible before you put any money on the line.
- Work towards Satisfying Goals
Retirement is your time to do with as you please. Those vacations you always meant to take and things you wanted to see are still out there waiting for you. Set financial goals that will allow you to reward yourself with once in a lifetime experiences. Research the total costs of the things you want to do to establish how much money you’ll need to put aside each month. Even if you only reach one large goal a year, you have something to look forward to and a lot of life to live. Don’t let retirement hold you back from exploring and living your dreams.
Retirement is the beginning of the next phase of your life. You’ll need to relearn a few things, but you’ll get the hang of it. The earlier you start planning and implementing changes in the way you manage your finances, the easier the transition will be.