Wednesday, July 24

New to Retirement? AVOID These 9 Bad Budgeting Habits

When they retire, a lot of people aren’t concerned about how they will manage their funds when they arrive. If you think about it, it’s a bit scary, because they never even consider hiring a financial expert, at least not until they hit their first financial issues during retirement.

In fact, a frequent financial mistake people make is not planning enough. In fact, it is a bit amusing how they start thinking and planning only AFTER their retirement starts. Why? It’s simple: planning ahead would make things a lot easier, but it’s never too late to start now, either. I’ve seen a lot of people in their mid-fifties who had nothing set aside and managed to succeed anyway. If you’re anything like them, here are some mistakes you need to avoid:

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Lots of people intend to carefully plan their retirement, but it seems that along the way, something happens, and any chance of putting a plan into place vanishes. Truth be told, that could be the cause of many things, and oftentimes, we’re talking about the fact that people are intimidated by their own financial situation.

Or, there could be something else: they simply don’t understand how they work. They could be a bit embarrassed to talk to any professional or expert, or they could be simply afraid of talking with someone that could later steal from them.

I know it sounds absurd, but America is a country of con artists, and its citizens are fully aware of this fact. However, putting your hand in the sand and isolating yourself won’t help: you need to start planning!

Retiring too soon

It seems that some people out there are obsessed with the idea of retiring early. Don’t get me wrong; I’d like to retire 15 years before I reach retirement age, so I FULLY get it. The problem is that those who actually plan on retiring earlier don’t even bother checking if they have enough to live a decent life. If you ask me, that’s a very important thing to take into consideration when you decide when.

The thing is, you’d be surprised to know how a couple more years in the working field could improve your pension plan. It’s miraculous, actually. And while I get why you fantasize about retiring earlier and completely unexpectedly, make sure you are also prepared.

Relying only on your Social Security or company pension

Another mistake you are prone to making is trusting your company pension or your Social Security benefits completely. If you want to live your retirement years as relaxed as possible, you won’t be able to live only with one of those two.

If you want to check it yourself, by all means: A cursory glance at your future retirement expenses might calm you down and make you realize that living only with one of your pensions won’t be enough. Besides, do you really want that for yourself?

We simply know too many people who could confirm that worrying about financial matters is extremely debilitating and might also lead to health problems such as stress and depression. This is definitely not something you’d want to do during your golden years!

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Not saving enough

According to the Federal Reserve Report on the Economic Well-Being of U.S. Households, it seems that 25% of non-retired adults haven’t prepared anything (financially) for their retirement. In fact, half of the population felt a bit insecure and doubtful about their ability to manage their own retirement finances.

If we were to discuss a certain amount of money, it seems that the average amount of money people save for retirement is $60,000, which is, for obvious reasons, not enough to live for 20 years. When you start calculating how much you need before retiring, you might have to get a clear idea about your current and future expenses.

Financial support for your adult kids

Shockingly, half of the parents who have an adult child still provide them with some kind of financial support. Besides, 62% of adult children are still living with their parents, and they don’t even contribute to any household expenses.

On average, a parent who still financially supports his or her children spends $1,000 a month on food, health insurance, rent, tuition, and maybe even travel. Well, it gets worse, as those parents who still work spend more on their beloved children than they do on their retirement funds. Some loving parents out there are unconsciously jeopardizing their entire retirement funds just to make sure their kids are okay, and while this is noble, oftentimes they ruin their own lives.

Not knowing how much your living expenses are

The funniest thing is probably the fact that some people think that they will stop spending so much money once they retire. I’m not sure what they’re thinking, but it’s either “why would I need that money? I won’t need any new clothes” or “fewer vacations; I’ll be too tired”. But God bless you, what happens if you feel better than ever?

And still, there are a ton of other expenses that might increase. What happens if, once you retire, you realize you have time to fill your garden with flowers, renovate, or start a new hobby? You’ll definitely need money for that! Not to mention that your household expenses will increase since you’ll be spending more time at home than you did while working!

Spending too much after retiring

When you see all that money in your bank account (that you’ve worked so hard for your entire life), it’s fully understandable to dream about a new car or that pretty and expensive clothing item! After all, it’s only ONE BIRKIN BAG, right?

I wish it were this easy, trust me. Unfortunately, this is exactly the kind of spending that might get you into financial distress. So many people out there spend too much right after retiring. It could also be a psychological effect since retirement comes with all this free time and the kind of freedom you haven’t had since graduation.

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Spending too much money on downsizing

Yes, downsizing is a great decision, especially if you live alone or only with your spouse. After all, the kids are big now, and you shouldn’t pay so much on bills. But be careful, as downsizing might break your wallet, too.

Some people think that getting a smaller home will do the trick, and they’re not completely wrong, but by the time they finish all the renovations and the moving expenses, they end up spending more. So, if you plan to downsize, that’s great, but make sure you set up a budget so you won’t throw your money away on things you won’t even notice.

Choosing an expensive relocation

While we’re moving, the same goes for relocating. Whether you want to be with your kids and grandkids or closer to your elderly parents, be careful. In some cases, this kind of decision might drain you financially.

For instance, moving makes a lot of sense; if you move out of a $1 million home and into a $300,000 one, that’s only a couple of hours away. Another great piece of advice would be to rent before buying anything. If you decide to move to Florida, for example, and once you get there, you realize that you hate it, you wouldn’t want to go through all that moving fuss again, right?

I hope you’re satisfied with what you’ve read here, and if, by any chance, you already are somehow “forced” to pay for your home repairs before moving out, here’s what you might want to read: How to Pay for Pricey Home Repairs and Still SAVE Money (7 Tips)

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