Spending money after retirement can become a challenge. Without a steady source of income, you are left relying largely upon your savings and perhaps one or two benefits, which are likely not enough to live off.
Recent data released by the Bureau of Labor Statistics found that households in which members were 65 and older spent an average of $3,800 a month, which is about $1,000 less than the monthly average spent by all U.S. households combined, USA Today noted.
It can be easy to overspend but, when you have to watch your cash flow, it is important to pay particular attention to your spending habits.
This is where a good post-retirement budget comes in. Here are a few tips to consider:
1. Be honest with your budget — To get started, it is important to consider exactly what your retirement income is and what all your expenses are. It is easy to overlook small things, but they all add up. Take time to consider exactly what your retirement income is, from all sources, and how it compares to your expenses, Smart Asset advises.
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2. Consider your housing costs — Your home may be paid off but that does not mean there will not be related costs that arise. Maintenance and utilities should factor into your buget. Fidelity recommends budgeting at least 1 percent of your home's value for annual maintenance.
3. Track your spending — Many households make the mistake of overlooking minor expenses. A takeaway coffee, a movie ticket — these accumulate over time. One retired couple, Steve Adcock and his wife Courtney, said they keep track of all purchases, CNBC reported. “We know exactly what we bring in and exactly what we spend — and on what,” he said. “Knowing where our money goes is critical to maximizing our savings and pinpointing where we could probably cut back.”
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4. Transport — A massive hidden expense is transport, especially if you are using your own vehicle, but you will be surprised by how much you can save if you make a few adjustments. Personal financial website The Balance recommends taking advantage of modern technology such as Google Maps to search for public transport routes online, or downloading apps such as Uber and Lyft, to get around.
5. Travel for less — Just because you are on a tight budget doesn't mean you need to forego travel, you just need to be smart about it. Traveling out of peak season could help you save, as well as keeping track of discount airfares and accommodation specials, U.S. News noted.
6. Look after your health — Investing in your health and wellbeing could save you thousands in healthcare costs later in life. Taking up a new exercise, joining the gym, and making healthier food choices will greatly benefit your health and ultimately lower your medical expenses, The Balance said.
7. Communicate and involve your partner — Money issues are common causes for disagreements within marriages but they are magnified when finances are tight and you are forced to follow a strict budget. Ann Dowd, a vice president at Fidelity Investments, said it is not surprising to find one spouse may be working hard to save while the other lives in the moment and spends impulsively. Her solution? “Creating an overall budget together can be an effective way for retired couples to identify shared goals and spending priorities,” Dowd said.
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