One thing is certain, worrying about money is not a great way to spend your retirement years. The fear generally comes from a sense of not knowing if you’ll be OK. You may wonder whether you’ll end up spending too much early on, or be too frugal and miss out on opportunities you could easily have enjoyed.
When people stop working full time, or completely, they often say how scary it feels to begin with. There used to be a steady stream of money coming in, even if it was quite modest, but now that’s changed. They wonder how they will manage for the many years to come.
The solution is to remove the mystery by creating a budget, seeing how it works in reality and adjusting things as required. Suddenly you’ll feel like you’re in control, even if it turns out a few cut-backs are required or some additional support needs to be found.
How to create a budget for retirement
It’s never too early or too late to budget for your retirement, so the best thing is to get started today. Budgeting is not just for people who are struggling financially. It’s simply a plan that offers peace-of-mind and the chance to confidently make the most of your money.
At its simplest level, a budget involves comparing what you earn with what you spend. You can then make necessary adjustments. The aim is to spend a little less than you earn or at least know that your retirement nest egg will last the distance.
The most important thing is to be realistic. This is a time for facts, not wishful thinking. Creating an optimistic budget or something you can’t stick to is simply a waste of time.
- Gather a complete record of your everyday spending. You can do this by running a spending diary in a small notebook for cash purchases, keeping receipts for a few weeks and looking at your bank statements. Don’t forget to include any regular contributions you are making to savings goals.
- You’ll also need to identify less regular costs, like car insurance, vehicle registration, house insurance, medical bills, holidays and gifts. You might also need to put some money aside each year for long-term expenses like painting the house or updating your car.
- Next, it’s time to focus on income. This could include pay for working, NZ Super, government benefits and interest earned on savings or investments.
There’s a great budgeting tool on the Sorted website that saves you having to do the maths on weekly, monthly and annual expenses. It will also prompt you with typical expenses you may have overlooked. You can save your budget as you go, then come back to work on it until it’s complete.
Testing your budget over time
A budget is a living document. It’s something you can revisit from time to time, to reassure yourself everything’s on track or to make adjustments, so you can still have confidence in your finances.
It pays to continue tracking your expenses closely for a few months to see how your actual spend compares with what’s in your new budget. You can also make adjustments as things change, which they will, or when an unexpected expense occurs. The other great thing about keeping a living budget is you can refer to it when something new comes up that you’d like to buy or pay for. You can add it into your online budget and see the impact immediately, then identify cutbacks you’d need to make.
Rather than being restrictive, a living budget can give you a wonderful sense of freedom.
Ways to reduce some expenses
Reducing expenses can help balance the books or create a surplus that you can put to good use.
When you start getting New Zealand Superannuation, you automatically get a SuperGold Card. This card gives you access to all sorts of discounts at retailers and service organisations. It also provides free public transport during off-peak hours in many regions. The SuperGold Card has a website and an app that make it easy to find participating businesses and organisations in your area. Some of the discounts may seem small, but remember every little bit adds to your total savings.
Community Services Card
If you qualify for one of these, you can use it to save money on healthcare and prescriptions. The back of your SuperGold Card will indicate whether you are eligible or you can visit the Work and Income website to learn more, including the qualifying income limits.
Changing where you live
If you live in a large family home, downsizing to something that better suits your needs can be liberating and save you money on rates, maintenance, heating and more. It can also free up a nest egg for income-generating investments. Houses and apartments in retirement communities are generally priced attractively compared to homes in the surrounding neighbourhood. Moving to one that suits your lifestyle could free up even more money.
Downsizing is a big decision with long-term potential consequences, so be sure to get some professional advice to help you factor in things like the one-off costs of moving and the reduced capital gain of a less-valuable property.
Some people choose to take in a boarder or rent a self-contained part of their property to generate additional income and enjoy some extra neighbourly company. That’s an option too.
Many people in retirement find they have more flexibility around when and where to shop for everyday items, like groceries. Taking some time to compare prices and being willing to try new brands, particularly supermarket home brands, can generate some worthwhile savings. You may also discover that fresh goods which haven’t sold on the weekend are on special every Monday morning, for example.
If you need financial help
If you are 65 years or over, the Senior Services division of Work and Income can provide a wide range of help. Qualifying for support will often depend on your income and cash assets, but that shouldn’t stop you enquiring if you are concerned or struggling to make ends meet. Here are some examples.
- An accommodation supplement to help with the cost of boarding, renting or owning your home
- A disability allowance to help with the extra costs due to a disability of medical condition
- Help for unexpected or emergency costs, such as:
- A grant towards the funeral costs you may have to pay when your partner dies
- Temporary additional support for up to 13 weeks for essential living costs
- A special needs grant for urgent one-off things like food, emergency medical care or bedding
- An advance payment of some of your NZ Super or Veteran’s pension for something essential that you urgently need, such as dental work, an appliance or house repairs
- Help with the expenses of caring for a dependent child when you’re their main caregiver
- A subsidy or loan for residential care in a rest home or hospital
For more information about Senior Services, visit workandincome.govt.nz or call 0800 999 727. They also produce a handy brochure for seniors. It includes information on their services, plus the details of other organisations offering help for things like:
- Health needs and hearing aid subsidies
- Home insulation
- Transport and parking for people with mobility difficulties
- Council rates
- Safety in the home
Nobody wants you to suffer
If you’re struggling to live a healthy and safe life on your budget, even temporarily, be sure to reach out for help. There’s no shame in asking and you certainly won’t be the only one doing so. That’s why these organisations exist.