Unless you happen to have a pension, or a job in retirement, you will most likely spend retirement living on a set monthly income.
Your goal will be to stretch your income as far as possible each month, while maintaining your quality of life. There are a few key things you can do to optimize your spending.
Work on a budget that matches your values. In retirement, it will be crucial that you develop a budget and stick to it. Track your expenses each month and put together a budget for how much you spend each month. Then take a hard look at how much you spend in each area. Some areas will naturally decrease – for example, you won’t have commuting costs if you are no longer working, and you will not need to purchase expensive work clothes (if that’s the kind of job you have) when retired. But will you still want to spend $80 each month on cable, or will it suffice to access media through streaming services such as Netflix, Hulu or Amazon Prime (which come at a fraction of the cost) and an occasional video rental? Similarly, you can save quite a bit by cutting down on the number of times you eat out. To still maintain your quality of life, you may want to focus on a few higher end dinning experiences. You’ll save money overall and maximize the experience of eating out.
Consider downsizing. While it is often an emotionally charged decision, living in a smaller home can save you money in a few ways. Moving from a four-bedroom house to a two-bedroom home, for example, can save you cash through reduced heating and maintenance costs. In addition, you’ll likely be able to access significant equity, even after the costs of buying and selling a home and moving.
Think through whether you will need two vehicles. If you and your partner will no longer be making a daily driving commute for work, you may not need two vehicles. Selling one can bring you income and save you on ongoing maintenance and insurance costs. This may be a particularly compelling option if you have access to an efficient public transportation system.
Revisit your insurance policies. As you retire, you should revisit your insurance policies and consider how they meet your changing needs. For example, if retirement comes close on the heels of your children leaving home, you may no longer feel that you need life insurance.
Know where you can get a senior discount. From restaurants, to museums, to rental car agencies- there are so many places where you will be eligible for a senior discount. Always ask when making a purchase as discounts of 10% to 15% can help to significantly stretch your budget. A membership with AARP or Costco can allow you to access additional senior discounts. Also be aware that your newly flexible schedule will allow you to get discounted rates; for example discounted movie tickets for matinee showings and discounted mid-week flights. Do your research before making a purchase and you may be surprised by how much you can save.