How to Create a Retirement Budget
Jeff Martin is a financial advisor at Cornerstone based in Reno, NV. Jeff has earned the Life and Health Insurance Licensure and has passed the Series 65 examination. He enjoys being able to help clients create customized strategies for their portfolios based on their unique financial goals.
HOW TO CREATE A RETIREMENT BUDGET
Brace yourselves, budget discussions are coming. I know, I know, budget discussions are about as much fun as getting a root canal without nova cane, but just like needing to fix dental issues, this should be addressed as well. Without some understanding of what your monthly income needs are, there is no way to determine if you have achieved financial security or to develop a plan to ensure you stay retired.
CASH FLOW PROJECTIONS
Many of you have been subject to our data dump cash flow projections that we get quite excited about (it’s ok, you don’t need to share in the enthusiasm). These can be very helpful in shedding some light on what things may look like years and decades down the road, based on the path you are on. There are hundreds of components to these that can be added, adjusted, tweaked etc., but the one component that has a very large, if not the largest impact is the expense or budget figure. It is because of this fact, I thought discussing this topic in more detail would be beneficial.
EXPENSE TRACKING TOOLS
One of the benefits of living in the 21st century is the amount of technology we have at our fingerprints (depending on how you want to view it). There are all sorts of expense tracking tools available, some are even built directly into our bank accounts and credit cards, such as My Spending Report. This can make the approach to developing a budget a bit quicker, and hopefully a little more painless. The basic concept with expense tracking tools/spending reports and the like is that they keep records of what and where money is spent. You can typically view this on a monthly or annual basis, and it provides an excellent starting point without having to keep every receipt from every purchase.
NEED-BASED VERSUS DISCRETIONARY SPENDING
What can also be beneficial with tools such as these is the breakout of where money is being spent. This is particularly helpful when it comes to determining how much of the monthly budget is need-based, and how much is discretionary spending. I have also found tools such as these to be helpful in identifying expenses that are not needed, or even forgotten especially in a “click to purchase” and prevalent subscription-based world we live in.
EXPECT FLUCTUATIONS
It is worthwhile to point out that when it comes to budgets, the expectation should be to expect fluctuations. You can spend hours painstakingly tracking expenses, so that you know what will be needed the following month down to the penny, only to have one of life’s curveballs thrown at you. Now your monthly budget has blown up due to the water heater going out, vehicle repair, or impromptu purchase of Taylor Swift tickets, etc. The point is budgets should be created with a little additional padding and based on your reoccurring expenses and monthly income needs. One-off items (Taylor Swift tickets) should either be planned for or supported by reserve assets such as emergency savings when and where possible.
REVIEW THIS ANNUALLY
While I have already spoken about the general disdain of budgeting (myself included), it is not a bad idea to review them on an annual basis, well because, things change. By reviewing your budget, you will be able to determine if you are staying on track, or possibly drawing more from your investments and savings than what is needed and being utilized.
WHERE TO GO FROM HERE
I hope by now, you have mustered some enthusiasm for budgeting, and are anxiously awaiting the next opportunity to log in and review your spending report, much like leaving the dentist with a newfound vigor for flossing. With that being said, we help our clients plan for their retirement future, including the in-depth finances that come with it. To see how our advisors could help you achieve your retirement goals, give us a call at 775.853.9033.
Based in Reno, NV, Cornerstone is for individuals and families looking to grow wealth, protect and preserve their life savings, and plan for the distribution of their estate in a tax-efficient manner through a tailored strategy. Schedule a time to discuss your financial goals with us.
This information does not constitute legal or tax advice. PCIA and its associates do not provide legal or tax advice. Individuals should consult with an attorney or professional specializing in the fields of legal, tax, or accounting regarding the applicability of this information for their situations.