As you enter retirement or start planning for it, one of the key decisions you will face is how to allocate your money. While your time in retirement is precious, your financial resources are equally important, and the two are closely connected. What do you want to spend your money on? How can you balance your budget to ensure your retirement dreams come true without jeopardizing your financial future?
From my experience as a financial advisor, I know that this process begins by clarifying what you truly want to do with your time. Your financial plan should support the life you envision in retirement, whether that means traveling the world or staying home and enjoying simple pleasures.
What Activities Will Shape Your Retirement?
When thinking about your retirement lifestyle, it’s essential to assess how much your favorite activities will cost. For example, if you enjoy reading, listening to music, meditating, or praying, you’ll likely spend very little. However, if your passions include skiing, attending concerts, or traveling extensively, you may need to draw significantly more from your retirement income.
To help you think this through, ask yourself:
- What kind of leisure activities do I want to prioritize?
- Will these activities increase my current spending on hobbies and travel?
By answering these questions, you can get a clearer picture of what your budget will need to accommodate.
Can Your Budget Support Your Dreams?
Once you have a vision for how you want to spend your time, the next step is to analyze your retirement income. Can your budget handle the activities you love? If you’re dreaming of a big annual trip or multiple trips of a lifetime, it’s important to factor in all costs, from travel expenses to hotel stays, food, and even pet boarding. Always add an extra 30% to 50% to account for the unexpected.
For example, if you’re thinking about spending a month away watching your favorite baseball team at spring training, have you considered the cost of tickets, accommodation, food, and transportation? Planning to live abroad for a few months? Don’t forget to add traveler’s health insurance into the mix.
While this kind of number-crunching might seem tedious, it’s essential. The best outcome is to fulfill your retirement wishes while still being able to pay your bills and feel confident that your income will carry you through retirement. It’s exciting to envision the experiences you want, but verifying that you can afford them ensures peace of mind.
What Are Your Financial Trade-offs?
As I often tell my clients, if something in your heart says, “I’ve got to do this!” it’s worth figuring out what trade-offs you’re willing to make to achieve it. Your Must Have experiences may require some financial adjustments, and it’s important to understand what you’re willing to forgo to seize those opportunities while maintaining financial security.
For instance, you might decide that cutting back on smaller, more frequent expenses—such as dining out or shopping—could free up the funds needed for a bucket-list vacation or an exciting new hobby. Being intentional about these trade-offs ensures that you can enjoy what you love most without overspending.
Does Your Home Support Your Retirement Lifestyle?
Your home plays a significant role in both how you spend your time and your money in retirement. Is maintaining your home taking away from your ability to enjoy the activities you love? If so, you might consider downsizing or outsourcing some of the household responsibilities to free up both time and financial resources.
Consider whether your home is enhancing or encumbering your retirement. Does it require too much of your time, money, or mind share? If your home is no longer serving you, it may be worth exploring options like renting or relocating.
Creating a Financial Plan That Reflects Your Priorities
Planning for how you want to spend your money in retirement is about more than just managing a budget—it’s about ensuring your finances support the life you want to live. You don’t have to cut out the things you enjoy, but it’s crucial to be realistic about how much your desired lifestyle will cost and what adjustments you may need to make to your spending.
Ready to Align Your Money with Your Retirement Dreams?
If you’re ready to make sure your finances can support your ideal retirement, I’m here to help. At Wealthy Choices®, I offer personalized financial strategies that align your money with your vision for the future. Contact me today at 781-577-2311 or visit wealthychoices.com to start creating a retirement plan that works for you.
