As per Jennifer Vernon for most retirees, the biggest worry comes in the form of threat of finance that they have to face after their retirement. People appear to be perplexed about the fact of how they would be able to pay their bills. Moreover, these retirees are not sure about the social security benefits that they get after their retirement. They don’t know how much they would get out of their retirement, so it remains a problem for them.
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Here is a complete plan of how to create a retirement budget:
1. Financial records are gathered.
2. A list for a monthly fixed expense is made.
3. Some money is saved to cover variable or unexpected events.
4. Non-recurring expenses are also included.
5. Get an estimate of what you will get from retirement.
6. Draw a comparison between total income and expenses.
7. Keep on checking your budget with time to maintain balance.
As per Jennifer Vernon the time that you spend in drafting this process would take a lot of your stress away, as you will gradually know that you have money for tough times.
1. Gather Your Financial Records
As per Jennifer Vernon to prepare a plan, you need to know your current situation. You may have your checkbooks and bank statements to get an idea about the expenses of the past few years. Many credit card companies help you in estimating your expenditures through credit card statements. Therefore, tax season would be the best time to do this, as you can have a clear idea about the money you have in your hand after paying taxes.
2. Prepare a List of Your Monthly Fixed-Expenses
There are some expenses that you come across monthly. These expenses include the school fees of your children, utility bills, mortgages, the premium for car insurance, and medical bills. Sum up these expenses, and you will have a number that confirms your spending.
3. List Your Regular Monthly Variable Payments
This can be a difficult task as your expenses keep on varying every month. These variable expenses might include the expense that you spend for any haphazard circumstances, entertainment purposes, or any medical emergency. Sum up all of these expenses for each category and divide that number by 12 to reach the monthly expenses. There are ways in which you can convert your variable bills into fixed bills, but still, there is a gap available of varying the costs.
4. Factor in Non-Recurring Expenses
If you are planning to go on vacation, or you are going to buy a new car, this is a non-recurring expense, and you have to do advance planning for this. On the other hand, there are other expenses that you pay once or twice a year. These expenses may include repairing costs, Christmas gifts, or birthday gifts. So once you have calculated all these non-recurring expenses, divided them by 12, and you will have a rough idea of your non-recurring expenses.
5. Estimate Your Retirement Income
In this part, you have to add all the income from different resources that you are going to have after your retirement. For most retirees, there is only one option of social security benefit. Add this income with the money that you expect to receive from all other sources like interest or dividends. You might have the revenue from the jobs that you do in your spare time, or from selling your services online on social platforms. However, you do not have to count what you are going to have from winning the lottery or inheritance. This way, you can have a clear estimation of your retirement money.
6. Compare Your Total Expenses to Your Income
Now, you have to add all the expenses mentioned above to calculate the budget of one month. The figure that you have at the end of your calculation will be the total expense of your month. It might include little flexibility. This way, you can calculate your monthly budgets. However, you have to keep on checking the balance between your spending and the money you have. In the end, you must have some extra money.
Moreover, it will be better for you to cut your expenses where you can so that you will have money you can utilize, or to adjust the budget for next month.
7. Keep on Checking Your Budget Periodically to Make Sure You’re on the right track
It is useless to make all the calculations mentioned previously unless you are not sincere to abide by the results you receive from this calculation. You should check your calculated budget every month, and then start spending carefully on the things. Once you are successful in maintaining the balance between your calculated budgets and spending on a monthly basis, you are on the right track, and this maintenance will assure you that your plan will work for the whole year.