Article

Budgeting for the Retired
June 13 , 2013

Retired people face money challenges that working folks don't. People on a fixed budget look at spending and investing differently than those still on the job. People who still have a paycheck coming in can usually find a way to pay for extra, unexpected expenses. For the retired, sudden expenses can be more difficult to cope with. 

Once you're retired, it is important for you to stick to your budget. This may be hard for some people to do especially when your bank account tells you there's Rs 20, 00,000 stacked up in there. But you mustn't forget 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.

As a retiree your income could be from a combination of return on investments, interest on savings or annuities, unless you take up a part time or full time career. 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.

A budget should include all monthly expenses. You can either track your spending by hand or use budget tracking software. Think of your budget as the mechanism that expresses your life priorities. Allow at least 5 percent in extra funds for unexpected expenses. If you don't know your expenses, you can get a rough idea by writing down the cost of everything you buy for a month. Retirement may not mean lessened expenses. You may not have commuting costs, but you may find increased costs in other areas, such as medical expenses. Take inflation into account. If you are going to retire for at least 20 years, money at the end of that time frame will not be worth as much. Prepare for at least 3 percent inflation for every year of retirement.

Travel-related expenses decrease in a year or two (maybe lesser or more for some people) after retirement when you've visited grandchildren far away and some tourist places you always wanted to visit. Eventually the novelty of traveling and spending extra money begins to wane and people want to spend more time at home. Other expenses may go up, like if you decide it's time to redecorate a room in your house - especially if you're spending more time there. Again, watch your rupees 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 tempting to do "just one more thing", and then "just one more". Before you know it, you're thousands of rupees (or 10s of thousands) over your budget.

There will be times when your planning and budgeting won't work. There is no need to get upset about situations that are beyond your control. Do your best to figure out how to budget for the next surprise. Recognize that you might need to find a part-time or weekend job to bring in some extra money.

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