Your first year of retirement is full of anticipation and excitement for what’s to come. You suddenly have more freedom than you have had in years, which means endless opportunities to spend time and money on the things that you love. There is a catch, though – how do you determine whether you are spending too much? Unfortunately, while most retirees are well versed on how to generate an income for their retirement years, they often have trouble working out when and how to spend it.
While it may seem like you have a huge amount of income stashed away, you still need to budget. It is difficult to accurately predict what you will spend before you actually enter retirement, as there are too many unknown variables yet to be discovered. Your first year presents the ideal opportunity to set the bar, so that you can live comfortable for the rest of your retirement.
A good starting point is to estimate your expenditure for each year. This will provide you with the basis for your initial budget. Once you enter retirement it is important to keep track of your spending, and then compare it to your projected budget. It is also important to recognize lavish spending habits as soon as possible. Review your spending every three months to evaluate whether you are on track.
You need to allow for unexpected costs, too. A particular concern for many retirees is sudden health problems. However, anything that could derail your budget needs to be given consideration. It is for this reason that financial advisors suggest formulating a number of budgets. By doing so you can funnel contingency funds to where they are needed, with minimum impact on future retirement years.
Once you are over your first year of retirement, review your budget again. If you were under target, consider whether it was due to careful spending or adequate assets. Conversely, if you overspent on your budget, look at how you used your income and think about re-evaluating your lifestyle.
