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How to reevaluate your budget now that the kids are gone

Nov 21, 2011, 8:35 a.m.

The kids have finally moved out and retirement is right around the corner. Now is the time to take a serious look at your budget and ways it needs to be altered for retirement. Many folks erroneously believe that their spending will drop significantly after the kids leave the house and retirement years set in. While this may be true in a few cases, the majority of retirees find they spend nearly as much as they did prior to retiring.

The difference, however, is that these post-retirement spending dollars are generally for more enjoyable pursuits and items. Things like vacations, hobbies, and entertainment will now take center stage in your life. It's time to enjoy the fruits of your labor, but it's critical that you do so in a planned, systematic way. Remember, most of your fixed expenses will be winding down, but the variable expenses will likely be increasing now that your time is finally yours to enjoy.

The first step in reevaluating your budget post-kids is to determine your retirement income. Be sure to include Social Security, pension, your spouse's income, rental property income, money earned from small businesses, investment interest and any other sources of income, no matter how small. While this income will likely be smaller than your pre-retirement income, your expenses are also more flexible.

The next step is to determine your monthly expenditures now that the kids are out of the house. These would include your monthly core expenses, such as food, shelter, taxes, and utilities. Take this figure and subtract it from your monthly income. The amount that is left over is your fun money. This can be used monthly for entertainment and hobbies or saved for vacations and adventure. If there is not enough fun money for you to truly enjoy yourself, consider starting an at-home business or cut your core expenditures. This means things like downsizing your home, eating less costly foods, or even moving to a lower cost neighborhood. Many retirees have moved to Mexico or the Caribbean to cut costs drastically and still enjoy their retirement years.

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