Making a budget can be a time consuming and frustrating process; yet as we approach retirement, budgeting, and keeping to that budget is more important than ever. The 2013 Survey of Consumer Finances found that among all working households, the average savings for retirement was only about $2,500. The numbers do get a little better when looking only at households of those over 55, with the amount of savings averaging around $14,500. But that is still far less than the 80% of the income generated while in the workforce that specialists recommend retirees have set aside. The question for many people is what they can do to increase retirement savings and financially prepare for the future? Here are some tips to get you on track.Where is the Money Going?
One of the foundational parts of any good budget, is knowing where your money is going. Many people think of health care when they consider costs that come with retirement, and while healthcare costs can be a significant cost that is important to factor into a budget, it turns out that housing is the biggest drain on senior finances. According to a 2011 study, housing accounted for an astounding 47% of a senior couples total budget, where food and healthcare came in at 12% and 8% respectively. Those statistics do not account for the cost of long-term care facilities that may be necessary down the road.
The number of seniors carrying debt along with them into retirement is perhaps the highest it has ever been, with numbers ranging up to around 61%. But what kinds of debts tend to be the most significant for people entering retirement? The Survey of Consumer Finance found that typically the most problematic debt for seniors came from medical conditions and credit card debt. Fortunately, there are things that you can do now, to help avoid being in a situation where debt is an obstacle to enjoying your retirement.
Seeing the Road Ahead
The good news is that once you have a clearer picture of where your money will be going as you enter retirement, it’s easier to decide what items should be in your budget. Items such as housing expenses, food, transportation, utilities, and entertainment should certainly all have high priority in your budget. It is also recommended that when planning for your future, you include a healthy net for emergencies such as unexpected medical costs. Another thing that can really help is planning for the cost of living expenses to increase with time so you don’t find later on that the budget you came up with before retirement no longer adequately finances all of your needs.
Things You Can Do Now for a Better Tomorrow
If you consider all the factors and costs and find that you don’t have quite enough set aside to cover your future expenses, don’t despair! There are several things that will help you make up the difference. Perhaps the most important thing you can do is to cut credit card spending immediately, which will help keep you from adding to the problem. You can also look into the many resources available for debt relief for seniors. Reviewing your investments will also help you provide for your future. You can speak with a financial advisor, or do online research to find information on the best investments for seniors. The time spent researching investment options to make sure you make the smartest investment choices for you will be time well spent in the long run.
Keep it Current
Like any other long term plan, it’s important to check back regularly and make sure the budget and financial planning you have done is keeping pace with the economy and your needs. It doesn’t have to be a big ordeal, just look over your planned budget every now and then and be prepared to make adjustments as needed. Once you’ve got a budget and stick with it, you’ll be ready to enjoy your golden years without the strain of financial worries.
Photo: NeonBrand Photography