For the past few weeks, I have written about the first steps required to prepare for your retirement planning. Most recently I recommended that you identify the expense categories you want to establish and track your normal spending patterns for at least three months. Be sure that in those three months all of your expenses are reflected (e.g. insurance or property taxes that may be paid less frequently, and holiday gifts that have impact at the end of the year).
Now that you know where your money is going, establish a budget. Set a number for each expense category you have defined. This new “spending plan” may be more conservative than your current spending habits – especially if you discovered some surprises that beg for better discipline. Now is the time to address any conflict between your short term desires and your long term goals.
Spend some time thinking about what is really important to you when building the foundation for your future. Talk earnestly with your spouse/partner to align your plans. Do your spending and saving habits support or thwart your long term priorities? Make thoughtful decisions about adjusting your spending in order to accelerate progress toward reaching important goals.
Each of you has your own unique needs and priorities to assure you can enjoy your life the way you dream it can be. But I can give you some examples of the adjustments my husband and I made to get our spending in line with our plans for retirement.
· Our library cards have allowed us to reduce spending at the bookstore.
· We shopped for new rates on auto insurance and substantially reduced our rate without sacrificing coverage.
· Prepared/pre-packaged food is more expensive than raw ingredients. We changed our grocery-buying and cooking habits and saved a lot of money.
· I do my own manicures, and my husband does my pedicures. (He said it was OK to tell you.)
One more thought for you… You may be able to reduce your housing expense by re-negotiating your mortgage. If your mortgage rate is already low, consider making payments every two weeks instead of once a month. This won’t reduce your monthly outflow, but will increase of the equity you have in your home by speeding the reduction of the principle on your note.
Apply discipline to align your spending habits with your priorities and your long term goals. Live your life today while planning a full life for the future. One should not exclude the other.