Budgeting in retirement

jimi_man

enthusiasticsaver wrote: »

Some useful observations there folks so thanks for that. It seems lots of people do still budget in retirement, whether loosely or in more detail. I am not sure that I agree with the premise that if you need to budget you cannot afford to retire. We do shop at Lidl's and sometimes Waitrose or Tesco's. We are careful with our money as we were when working but we do holidays, days out etc more now as we have more time so that costs. By the time our state pensions kick in we will have a bigger income than when we worked but I still think we will budget as it is a lifelong habit that helps me feel secure and have confidence we are financially ok.

I don't think that was quite what was said. I think the comment was that if If your expenditure is running at a level where you need a detailed budget then you can't afford to retire. I think the idea behind (Marine life's quote I think) was that if your finances are at the sort of level that you need to account for every penny to makes ends meet, then probably it's not time to retire yet. That I agree with. Retirement then becomes a perpetual balancing act, which is stressful.

jimi_man

JoeEngland wrote: »

A couple of years ago we started shopping at Lidl after snobbishly thinking the products would be poor quality. Not only do we save a lot of money by doing this but some things like fruit and veg are better than from Sainsburys where we used to shop. We still get a few things from Sainsburys that Lidl don't sell, or a couple of things aren't good enough quality. I view shopping at Lidl not as scrimping but avoiding wasting money by paying more than necessary.

I've used both Lidl and Aldi. Yes they are cheaper, no question. Some of the stuff is ok, and I'd happily have them again. However the choice is somewhat (very) limited - and the meat/fish is very poor.

As for the irritating aisle in the centre which seems to sell mass produced, low quality Chinese garbage that people seem to think that they have to have, well as far as I'm concerned they could get rid of that and put a decent fish/meat counter in or expand their fresh stuff. When you add in surly and uncommunicative staff, small areas to pack your stuff and very limited car parking I shan't be going again.

OldMusicGuy

jimi_man wrote: »

I think the comment was that if If your expenditure is running at a level where you need a detailed budget then you can't afford to retire. I think the idea behind (Marine life's quote I think) was that if your finances are at the sort of level that you need to account for every penny to makes ends meet, then probably it's not time to retire yet. That I agree with. Retirement then becomes a perpetual balancing act, which is stressful.

I'll have to disagree with this. By budgeting and focusing on what we are spending, we are able to avoid frittering money away and also make sure that we get the best deals going on a range of expenditure areas. We've gone from being people that didn't pay a lot of attention to what we spent to people focused on living more frugally and sustainably and that's enabled me to retire early.

We don't live hand to mouth but we are careful with our money. However, we have made some "sacrifices". We can't afford to go on lots of holidays, but we both agreed my health was more valuable than going on holiday. We've had plenty of nice holidays over the years, now we want to enjoy our remaining time together rather than have me die of a heart attack.

I'm afraid I find the responsibility of managing a 30 plus year retirement for two people primarily on a DC pension a bit stressful. I would imagine if you mainly relied on DB pensions there would be less stress, but increasingly people have to rely on DC pensions.

Doing a detailed budget seems a small price to pay to me for having the confidence that our finances are on track. It certainly doesn't mean we aren't ready to retire. Unlike Marine Life, who of course wasn't ready to retire, regardless of how much money they had.....;):D

Triumph13

Some people are just naturally more frugal than others. Where you are on that spectrum makes a huge difference to how useful a detailed budget is. If you naturally spend like a sailor on shore leave then it's pretty damn essential. If you are a tight git (like me) then it would only be useful if we were in pretty dire straits.
Everyone is at a different point on that scale and so everyone will have an answer that is right for them, but may not be for the next person.

Sea_Shell

Whether we'd have £10k or £50k "budget", I'd still like to keep abreast of where that money's going, and in what categories.

It shows you trends that you might not otherwise see.

JoeEngland

jimi_man wrote: »

I've used both Lidl and Aldi. Yes they are cheaper, no question. Some of the stuff is ok, and I'd happily have them again. However the choice is somewhat (very) limited - and the meat/fish is very poor.

As for the irritating aisle in the centre which seems to sell mass produced, low quality Chinese garbage that people seem to think that they have to have, well as far as I'm concerned they could get rid of that and put a decent fish/meat counter in or expand their fresh stuff. When you add in surly and uncommunicative staff, small areas to pack your stuff and very limited car parking I shan't be going again.

Certainly Lidl doesn't have as much choice as the 3 big supermarkets. The limited packing area is a pain but I can live with that and less friendly staff if it saves money, and it saves hundreds of pounds a year easily. We actually use Lidl, Iceland and Sainsburys, but only get the absolute minimum from Sainsburys that we can't get from the other two.

badmemory

I need to budget fairly sensibly (not too carefully) as I need to do a money shuffle usually once a month so money stays where it is doing most good for as long as possible. Unfortunately I also have to preserve the savings I have as it is seeming unlikely that my son will ever work again. We all do what we need to do & this is what I will need to do!


As an aside, I love Aldi, everyone at my local one is friendly & actually smiles! A lesson maybe my local Tesco should learn although they are getting better. As for the centre aisle, well that to me is a way of seeing if something you haven't considered before may be worth trying. My dehumidifier is a good example. I also prefer to put my shopping back in the trolley & repack later than having stuff almost chucked at me packing them in a hurry & discovering I have put a kg of potatoes on top of something fragile.


It is all down to your perception of things.

OldMusicGuy

Another issue to consider is how you manage funds in retirement if you are a couple. My wife and I are pooling everything, because I have a large DC pot and some savings, while she has a small DB pension and some savings (she was largely a stay at home mum). So by keeping a detailed budget and comparing actuals against that we can agree how we spend "our" money. We each have a small (equal) monthly allowance for our own stuff and to buy presents, but apart from that everything is pooled.

As I control the money and investments on a day-to-day basis, this allows me to be transparent with my wife so she can see where everything is going. If I didn't do this and just said "don't worry dear, I have it all under control", I think that looks like "controlling" behaviour and I personally wouldn't be comfortable with that. We have regular budget reviews so that she's always abreast of what is going on with our finances.

This arrangement probably wouldn't be necessary if each partner had their own adequate pension provisions and they wanted to maintain a degree of independence from each other. Howerver, we've always approached retirement on a "couple" basis.

Marine_life

jimi_man wrote: »

I don't think that was quite what was said. I think the comment was that if If your expenditure is running at a level where you need a detailed budget then you can't afford to retire. I think the idea behind (Marine life's quote I think) was that if your finances are at the sort of level that you need to account for every penny to makes ends meet, then probably it's not time to retire yet. That I agree with. Retirement then becomes a perpetual balancing act, which is stressful.

Yes, that's what I meant...but with the following qualifications:

1. It is always a trade-off between a) stress of work and b) stress of living a carefully budgeted existence. If a) is significantly greater than b) then that may be a compromise worth making. For me, it wouldn't be.

2. Not having a budget as such doesn't mean that we didn't work through all the numbers (i.e. both income and expenditure) prior to retiring in some detail. My point was I don't want to worry about it on a daily basis (and consequently don't monitor).

3. Not having a budget also doesn't mean we are spendthrifts. I actually rely quite heavily on the mysupermarket app and try and wait until items are on special offer and / or buy at the cheapest supermarket.

OldMusicGuy

Marine_life wrote: »

Yes, that's what I meant...but with the following qualifications:

1. It is always a trade-off between a) stress of work and b) stress of living a carefully budgeted existence. If a) is significantly greater than b) then that may be a compromise worth making. For me, it wouldn't be.

2. Not having a budget as such doesn't mean that we didn't work through all the numbers (i.e. both income and expenditure) prior to retiring in some detail. My point was I don't want to worry about it on a daily basis (and consequently don't monitor).

3. Not having a budget also doesn't mean we are spendthrifts. I actually rely quite heavily on the mysupermarket app and try and wait until items are on special offer and / or buy at the cheapest supermarket.

I think you are overestimating the "stress" of budgeting. We budget on a monthly basis across 32 categories. I do a monthly review of bank, credit card and PayPal statements to allocate expenditure across these categories. Because I have an actual/budget/variance analysis in my spreadsheet, it then automatically shows me where we are over/under, both on a month and YTD basis. It also forecasts total annual spend by combining actuals to date with remaining budget.

We have a target range of annual expenditure which means we don't stress on a daily basis.
I look at our long term plan on a six monthly basis in terms of how investments are doing to see if we need to reset the long term plan and maybe focus more closely on controlling expenditure in certain areas if we are going to overshoot the top range of annual expenses. This will also affect our investment asset allocation.

We certainly live a carefully budgeted existence and have changed our lifestyle to accommodate that, but there's not much stress involved. The stress is more about how our investments will perform over 30 years, will inflation take off again (that would cause us problems) and things like that.

I think there's more fundamental issues about deciding if/when you retire. It is the trade off between working to acquire more money so you can have more stuff and do more stuff in retirement as opposed to retiring as early as possible and accepting you won't have some of the stuff you used to have, and can't live the lifestyle you used to have.

Everyone will be different in how they make that choice, some people (like DairyQueen's partner) seem to just want to go on and on, while others like me were keen to get out of the rat race sooner than planned. The point about detailed budgeting is that it gave me the comfort that I could make the trade-offs that I needed to if I retired early, and it continues to give me the comfort I need to know I didn't make a huge mistake.

Maybe it helps though that I am a spreadsheet nerd that spent their career in corporate finance and accounting systems.....