Planning your retirement is one of the best things you can do when you’re aiming for financial independence. Even if you don’t see yourself leaving your career for a good few years yet, it pays to know exactly how you’re going to set yourself up for a comfortable life when you’re not working.
Unfortunately, a lot of people these days leave it until the last minute to start thinking about how they’re going to prepare financially for the future.
If you’re thinking it’s about time you had a plan in place for your retirement budget, you’ve come to the right place. Let’s get started.
Step 1: Figure Out What’s Important to You
The first thing you need to do when establishing your retirement budget is put a few goals in place. Think about what kind of lifestyle you want to lead when you’re not going to work every day anymore. Would you like the opportunity to go and travel around the world? Do you want to have plenty of savings put away so you can take your grandchildren on trips to exciting places?
Deciding what matters most to you from day one is a great way to ensure that you’re prepared for the kind of life that you want when retirement rolls around. Don’t forget to think about all the money you’re going to need for the essentials too, like paying mortgage bills, food expenses, and the costs of other utilities.
Step 2: Know Which Expenses are Likely to Change
Even if you want to continue with the exact same kind of lifestyle you have now during retirement, it’s important to remember that some parts of your routine will change. For instance, the cost of essentials like your mortgage and housing fees might go down – particularly if you’ve already paid off a lot of your debt. You may even think about moving into a smaller house.
Additionally, there may be additional expenses that you need to consider, like fees for extra dental appointments and prescriptions. Take some time to think about the costs that are likely to go up and down by the time that you retire.
Step 3: Always Look at the Big Picture
One of the best things you can do when you’re planning for retirement is make sure that you’re looking at everything from a “big picture” point of view. For instance, when you’re applying for a loan, make sure that you compare your options online and ensure that you’re getting the lowest interest rate. This won’t just reduce the cost of your repayments in the short-term, it will also ensure that you don’t have as much to pay out later when you want to enjoy your retirement.
Every time you make a significant purchase or subscribe to a service that will last into the future, think about how it will affect your ongoing financial health.
Step 4: Know How you’re Going to Spend your Time
Adjusting to the different kind of life you’ll lead in retirement can be difficult if you don’t have a plan in place. Think about how your lifestyle and hobbies are likely to change, as this can affect the way that you spend your money. For instance, do you plan on spending a lot of time going to classes that cost money? If so, you’ll need to place more cash aside for this.
You may also want to have plenty of money in your budget for other forms of entertainment too, such as television subscriptions and trips to the movies. If you’ve got a lot of money that you need to dedicate towards keeping you and your partner busy, then you might need to look for ways that you can reduce your spending elsewhere.
Step 5: Know All of your Options
Finally, when it comes to making the most of your finances, remember that there are plenty of different sources of help out there. Speaking to the citizens advice bureau can give you an insight into the kind of assistance that is available to seniors in the UK who need help making the most out of their retirement years.
If you want to keep earning more money even when you’re older, you may also look into passive methods of making extra income. For instance, if you’re going to travel a lot, think about renting your home out as an Airbnb accommodation when you’re not using it. There are a lot of fantastic new ways to make cash around today.