How to Budget Your Way to a Comfortable Retirement

Do you know where your money is going? Your first response may be, “Of course, I know where I spend my money.” However, it’s likely that you have bills on auto-pay, subscriptions you don’t use, and a few areas of your budget that could use some maintenance. Especially for those focused on long-term retirement savings, budgeting could be your key to your dream post-work life.

Here’s how you can budget your way to a comfortable retirement.

Track Your Spending

Even those who are diligent savers have areas of their budget that need attention. Try tracking your spending for two to three months, down to the penny. Some use budgeting apps for this, such as Dave Ramsey’s EveryDollar, and others take an old-school approach with a spreadsheet.

Whatever fits your lifestyle best, use these types of tools to track every bill you pay, dinner you buy, and dollar you donate. This process isn’t meant to restrict your spending necessarily, as you should spend the same way you always would. Rather, tracking your spending will show you how much you spend per month and where your spending might be too high for your taste. It also gives you an idea of how much money you may need every month during your retirement years.

Pro tip: Ask your local Southwestern Investment Group advisor about the complimentary budgeting software we offer to all clients.

Once you’ve tracked your spending for a few months, calculate your average spending for each category and then all together. For example, figure your average restaurant spending over those three months, and then also your average total spending for that time as well.

This is a great chance to take a step back and consider where your money is going and how it could potentially benefit you more if you adjusted your spending here and there. If you see that there are bills that you consider too high, you can now take steps to find cheaper alternatives. You can also take this opportunity to cancel unused subscriptions, such as streaming services or gym memberships. Overall, identify areas of your spending that you know you could change without dramatically affecting your day-to-day.

Create a Realistic Budget

Once you understand your spending habits, you can create a realistic budget with a spending limit on each category—dining out, pet expenses, and so forth. We emphasize “realistic” because if you try to limit yourself too much, you are more likely to spend past your budget and feel discouraged. There are many ways that individuals and families try to stick to their budgets. You can try the Dave Ramsey envelope system, or if you’re using a spreadsheet or app, you can update them as you spend. Choose whatever works best for you.

Consider these tips when creating your budget:

Most importantly, try your best to stick to the budget. If you find yourself overspending, don’t give up—it’s just another opportunity to learn more about your spending habits.

Pay Down Outstanding Debt

The last thing you want hanging over your head during your retirement is debt. Use your new understanding of your spending habits to decrease your debt balances and work toward a debt-free life.

A Dave Ramsey strategy to consider for eliminating debt is his debt snowball method. With this strategy, you pay the minimum payments on all of your debt accounts, but focus most on the one with the lowest balance, regardless of the interest rate. You pay as much as possible on that balance until it’s at zero and then continue on through your list, with the next lowest balance being your next focus. Being out from under your debt payments will allow you to save and invest more toward your retirement along the way, especially once you aren’t losing money in interest.

Talk to Your Financial Advisor

Your financial advisor is committed to helping you succeed in your retirement planning. Find an advisor in your area who specializes in retirement so that, together, you can work toward a strategy to achieve your goals. An advisor will listen to your aspirations and design a sensible plan to make them a reality.

Are you working toward the retirement of your dreams? Contact the Dobyns Wealth Team to schedule an appointment with an advisor.

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