Minimise Expenses and Create a Budget

designbythink 2019, Quarter 2 Newsletter 2019

Retirement Rescue Remedy Rule # 2

Minimise expenses, budget and assess your future need

Answer the following questions:
  • Where does your monthly income go?
  • What are your bank/credit card charges?
  • On average, how much do you withdraw from the ATM in a week?
  • What do you spend the money on?
  • Do you know what your partner spends on average?
  • What does it cost to manage your home monthly?

MINIMISE EXPENSES NOW

There are few people who will slip seamlessly from working into retirement with no ill effect on their standard of living. For most of us there is a good chance that when we retire, our income will be reduced by at least 50%.

For this reason, it is a valuable exercise to try to reduce your current expenditure by 50%. That’s a huge reduction, and you probably won’t make it! It is important to consider cutting back now rather than having the shock at retirement.

Draw up a Budget

Budgeting is usually a chore that we avoid. But the time has come to draw up a budget, which will help you spend more carefully and eliminate your debt. Your aim is to SAVE, SAVE, SAVE.

It is important to know where you are going financially. It helps you to keep track of money coming in and money going out.

Budgeting also has other benefits:
  • It puts you in charge of your finances.
  • It encourages you to keep proper financial records.
  • It will help you to save money and reduce debt.

Once you have drawn up a budget, pay the essentials first. Bond repayments, accounts, loans, school fees, rent, car repayments and food are the essentials. These are often neglected because uncontrolled spending on credit has swallowed up your salary.

If you are spending so much on paying off clothing and appliance accounts that you cannot afford essentials and have to resort to going into debt to buy food, you are in serious trouble. If you do not control this you will sink deeper and deeper into debt each passing month.

Your aim is to have no debts by the time you retire:
  • List all your debts.
  • Decide on a time-frame for paying off your debts.
  • Draw up the plan and review it every month.

Luxuries today are robbing you of your retirement. You need to make sacrifices today for your financial security – saving and sacrifice go hand-in-hand.

Money that you pay in interest on your accounts is money you could be using to save for your retirement.

If you seriously make the effort to clear all debt by the time you retire, start reducing monthly expenditure a little each month and draw up a monthly budget (and stick to it), you will have made huge strides in securing your comfort and financial well-being in retirement.

Assess your FUTURE needs

If you haven’t got a plan, how will you know where you’re going? You build a house with a plan, you go on a trip with a plan, you make a dress with a plan – why not have a plan to ensure you retire comfortably?

Preretirement:
  • Manage your debt.
  • Minimise expenditure now.
  • Budget.
  • Start planning for the day you retire:

    Where will you live?

    How can you supplement your pension?

    If you plan to live in a retirement village – have you put your name down on a waiting list?

    Do your appliances need replacing?

    Does your house need maintenance?

    Is your car in good shape – do you need a newer, cheaper one?

    What will get you out of bed every day?

Working after retirement – your next career

Very few of us will be in a position to actually stop working at age 63. Also, for most of us the reality of living on a much reduced income will be difficult. Age 63 is still very young, considering we have another 30 years to live!

  • How will you fill those 30 years?
  • How will you supplement your income?
  • What could you do to make more money in retirement?
  • Do you need to acquire those skills now?
  • Do you need to buy some equipment now?

While you are earning a salary now, why not use it to prepare for your next career?