Once you reach your retired years, you may think that your previous planning efforts would put you in the clear from a financial standpoint.
However, the numbers that you use in your projections are in flux. This means that you must stay organized and keep on top of your financial status if you want to enjoy financial peace of mind in the years to come. However, monitoring your efforts on a monthly basis may be overkill. Furthermore, when your oversight of your finances and budget is too frequent, it can be difficult to spot trends and potential issues. With this in mind, it is great to take organizational steps at the beginning of each year. When you fall into this habit, you can stay on track to meet your future retirement financial planning goals.
Review Last Year’s Spending
Your personal budget in your retired years will fluctuate considerable, and many retirees notice that their expenses tend to increase over the years. For example, our budget may have been well- organized initially, but it was riddled with uncertainties. After all, you did not know with certainty what the inflation rate would be like, which service providers would increase rates and more. When you keep your budget updated based on realistic numbers, you can better plan for the future. A smart idea is to review your average expenses for all categories over the last year and to update your budget accordingly for the next year. Projecting your budget for the next several years is also a smart idea.
Check Your Debt Balances
Part of your planning efforts to prepare for your retired years may included paying off all outstanding debts. However, you can accumulate new debt in retirement. For example, you have had a financial emergency that resulted in credit card debt, or you may have needed to use auto financing to buy a new car. Therefore, get in the habit of always checking your debt balances each year. Your goal should always be to eliminate debt balances as soon as reasonably possible.
Just as you need to monitor your progress with debt reduction, you also need to analyze your investment accounts. Your future income is based on how much money you withdrawal from your accounts now as well as how well your investment accounts grow. It is just as important to stay on top of these accounts in your retired years as it was to stay on top of them in your pre-retirement years.
Update Your Net Worth
You do not necessarily need a specific net worth figure to retire. You simply need to have low enough expenses that you can live comfortably on the income that you have available. This is a simplistic description of finances in your retired years. For example, you need to take into account inflation, increasing medical expenses and more. However, when you update your net worth figure while taking these other steps, you can see how your wealth is increasing. Seeing how much progress that you have been between last year and this year can help you to feel more relaxed. Keep in mind that many retirees who properly manage their finances may see their net worth continue to increase over the years.
Financial management does not end after you retire. In fact, preparing for retirement income solution is only the first step. Once you are retired, you must stay on top of all aspects of your finances so that you can ensure continued financial freedom going forward. Remember that it is easier to correct issues sooner rather than later. A yearly review is common for our clients, if you need help staying on track and maximizing your retirement goals, call us today.