Many of us look forward to our retirement years as the time we can finally do what we have always wanted to. However, this involves a delicate balance of finances. Now that you are no longer earning but are still continuing to spend, you will have to tread a fine line between maintaining your lifestyle and ensuring that you have enough for the years ahead.
In this article, we share with you some money management mistakes that retirees tend to make, as well as how to avoid them!
Failing to Adjust Your Budget to Your New Lifestyle
It’s safe to say that retirement comes with its fair share of lifestyle changes. As such, your budget will also need to change. Previously, you may have allocated more towards transportation as well as equipment or outfits for work. Now that these are no longer needed, start to think about what you will be spending more on in the coming years. This will typically include health & wellness as well as the cost of long-term care, whether you choose to age in place or transition to senior living.
Spending Too Much Too Early
Everyone retires at a different age and you may have been lucky enough to be able to do so early. However, regardless of the specific age at which you retire, you can run the risk of spending too much too early if you are not careful. With so much more free time on your hands, you may feel like plunging into all the hobbies and activities you have been wanting to pursue for so long.
Overspending early on in retirement can be dangerous. Not only are you depleting your nest egg prematurely, you could also be missing out on potential returns you could have benefited from had you kept your money invested.
Supporting Your Adult Children Financially
Sure, there’s no rule against giving your adult children financial gifts or loans from time to time. However, you should not be supporting your adult children out of your retirement savings. The difference is that while your children will be able to earn the money back within a period of time, you are no longer working and will not be earning back any money that goes out.
It’s important to sit down and have a talk with your children so that the entire family is aligned on and informed about the decisions you are making.
Over-Investing in Your Property
As your children grow up and gradually start to move out, you may find that your property becomes too big for just one or two. While the value of your house may be appreciating, it’s not a wise decision to be asset rich but cash poor In your retirement years. Keep in mind that running a household also requires a significant amount of money, from homeowners’ insurance to the cost of utilities and maintenance.
If this is one problem you are experiencing, you may want to consider downsizing or selling your house and making the move to an active independent retirement community!