Toby Keith sings, “Cause if you don’t know where you’re goin’ you might end up somewhere else.” One of the foundations of a solid plan is having an idea of your expenses. This doesn’t mean tracking every penny like you’re going to be audited, but being able to track money coming in against money that goes out will help you determine a sustainable amount to live on throughout many years in retirement. If you try to put together a financial plan without knowing what you need to spend, it can be a frustrating experience.
In the last post we talked about planning for the unexpected and it was in terms of unexpected bad events. Let’s put the Debbie Downer aside and look at unexpected positives that you can afford in retirement if you plan accordingly. Would it be nice to know you have enough to take a spur of the moment trip with friends that wasn’t in your original budget? How about helping save for a grandchild’s education? Would you like to drive a car you can enjoy and not worry if it throws your plan out of whack? If you are living on a tight monthly budget, some of the additional fun surprises might not be realistic unless you spend down your savings.
We can’t control the market or tax policies any more than we can control the weather. Just like the weather, we can make adjustments to deal with what comes our way, but there are two main financial behaviors that you can control in your life and the earlier they are ingrained, the better. You can control what you spend and what you save. That doesn’t mean it is easy to spend less and save more, but creating those good habits can set you up to live the retirement you envision. If you follow the opposite and spend more and save less, well then you might end up somewhere else!
For help with your monthly expense tracking feel free to use our budgeting tool here.
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