You’ve worked hard for a lot of years and the day has finally arrived. Your office mates threw you a party. You packed up your belongings. And you drove away from work for the last time. You did it. You retired. For many people, retirement means freedom. No longer tied to a job, they feel like they can do whatever they want. Travel is often at the top of the list. And while retirement does bring some freedoms, some restrictions come with it, too. In order to manage your money well after retirement, you will need to find a good balance between the freedoms and restrictions.
As you’re planning for your retirement, keep in mind that most people’s spending increases during the first few months or years after they’ve stopped working. People typically want to take advantage of the fact that they’re not tied to jobs anymore and take the opportunity to travel more. This may mean more trips across the country to visit kids and grandkids, or trips around the world to visit favorite or famous places. Though it’s hard to predict what travel expenses will be 10 or 20 years down the road, factor some additional spending into your first few years of retirement.
Once you’ve retired, stick to your budget. This may be hard for some people to do. You may look at your bank account and feel relatively wealthy because you’ve got $1 million in the bank. But remember that this money has to last the rest of your life – which could be 10, 20, even 30 years. So, while it’s okay to splurge on some extra vacations or shopping sprees, remember to exercise some restraint, too.
Eventually, in a year or two (maybe less for some people), the novelty of traveling and spending extra money begins to wane and people want to spend more time at home. Travel-related expenses decrease during this time period, but other types may increase. Though you may not spend money on flights across the ocean, you may decide it’s time to redecorate a room in your house – especially if you’re spending more time there. Again, watch your dollars carefully. If you have an idea to redecorate or remodel, work out the details before you start anything. Get estimates for a specific amount of work and stick to that plan only. Once a remodeling project is started, it’s easy to do “just one more thing,” and then “just one more.” Before you know it, you’re thousands of dollars (or 10s of thousands of dollars) over your budget.
Another important thing to keep in mind after you retire is not just how you spend your money, but where you invest it. A lot of people had to delay their retirement plans in the last couple of years because so much of their money was invested in the stock market. Diversification is always important where investment is concerned, but this is especially true after retirement. Consult regularly with a financial planner and make sure your money is spread out enough to protect you from losing too much if any one industry or market begins to decline.
Along that same vein, be sure you keep your spending in check even when your investments are doing well. You’ll be tempted to forego your budget if an investment starts out-performing your expectations, but remember that it could start declining just as quickly. By setting and sticking to a modest budget, you’ll take proactive steps towards ensuring that your money will be there when you need it.
For more tips and tools to help you manage your home, money and credit, including a Debt Management Plan that helps you get out of debt faster by paying smarter, visit Quizzle.com. And check out these other great, money-saving articles:
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