Handling your finances isn’t always a walk in the park.
Getting a financial plan to work for you can be time-consuming and stressful, but it doesn’t have to be. There are so many tools and strategies available to you to help take the stress out of your finances.
Let’s see how!
Rethink Your Budget
Both creating and sticking with a budget is a challenge for many households. From categorizing expenses to understanding where and how to save, it can be a tough task. Budgets are often seen as cumbersome, but that’s not how we view them here at TFS.
When you change your approach to budgeting, you will find that you are able to live your budget as opposed to your budget dictating how you can live. How can you do that? Too often I see people get burdened by their budget and all of the categories that come along with it: food, housing, entertainment, etc.
In retirement, spending needs change even further and can become more complex. Often, spending in retirement can skyrocket because you have more time on your hands to do the things you love. Travel, golfing, fishing, and even taking the grandkids out for ice cream are all events that can start to add up quickly. Unfortunately, overspending in the beginning of your retirement can mean that you’re losing savings that you can’t replenish later on when you may need it most in the event of a medical emergency, or if long-term care needs crop up.
Let’s say, for example, a household sets aside $200 a month for entertainment expenses in retirement, but they actually spend closer to $220. This overage, while it may seem small, may cause overspending in other areas of your budget, or make it tough to extend the life of your retirement savings.
Instead of breaking your money down into categories during retirement, evaluate the amount of money you have coming in each month and use that as a starting point, as opposed to the smaller categories. The most important aspect is knowing both what you can, and can’t, spend – and what your absolute maximum to spend in a given month or year is during retirement, to make sure your savings lasts for the rest of your life.
Budgets are a tool to help you stay in control of your financial life. So use the budgeting method that makes you comfortable whether it be your favorite notepad and pen or an Excel spreadsheet or even an app. No matter how you access the tool, just be sure that you are intentional about using it.
Adopt Automation When You Can
We all feel stress in different ways. I often feel stressed when I am behind, lost, or forget something important. I’m sure we can all relate to that happening. You may have forgotten to put gas in the car or didn’t bring the coupon to the grocery store, or missed a payment. Sometimes there is nothing to be done after you forget something, and sometimes there is.
With your finances, you can adopt automation to help you stay on top of your financial readiness. Automation can be helpful in many areas of your life, but there are two that really stand out: your savings and your bills.
Saving is a long game. It isn’t accomplished overnight, often taking many years and consistency to accomplish. Automation can help ensure that you are contributing to your retirement accounts and other savings ventures each month. Some examples are your 401(k) contributions, IRA, and other savings accounts. By automating your savings, the money you contribute each month will give you the motivation to continue to save and reach your goals.
Bills are apart of your daily life and in order to stay in control of your finances, it is important to pay all of your bills on time. Automating your monthly payments: house, car, credit card, utilities, etc. will keep you from missing a payment and any penalties that come along with that.
In retirement, automation may look differently for you. It can help to set up an automated “paycheck” that comes from your retirement savings account distributions every week, or biweekly. This keeps some level of consistency in your cash flow, and makes creating a retirement spending plan easier.
Automation is a great tool, but you don’t have to dive in all at once. Adopt automation at the rate that makes sense for you and your comfort level.
Test Your Plan
One of the best tools you can use to take the stress out of your finances is to eliminate the unknown. If you don’t know your budget will work, test it. Try it out and be flexible to make adjustments as you go along.
Testing your budget will alleviate the fear or uncertainty you may feel while providing a platform to work from.
Our Financial Planning Strategy
Financial planning is more than living for today. It takes a critical look at the way our decisions impact us both in the short-term and in the future.
Here at TFS, we aim to take a balanced approach to your finances by addressing both your short-term and long-term needs, wants, goals, priorities, and values. The combination of each contributes to your readiness to create a plan that will work best for you.
Money can be stressful, but it doesn’t have to be. By planning ahead for tax-efficient retirement distributions, or big financial events in your life, you’ll be able to set yourself up to walk down a good path.
We love helping people take control of their finances. Does this sound like you? If so, give us a call—we would love to get to know you.