Budgeting in retirement

Terron

badmemory wrote: »

Well I have never had enough money that I felt I had no need to plan a budget. Does anybody actually like budgeting? Surely it is just something we need to do to avoid paying the greedy banks even more of our hard earned cash. I have a friend who doesn't budget & his overdraft & charges are enough to make your eyes water.


Budget so you have equal spends for every month & life is so much easier. Don't budget & spend a couple of months living on yellow stickered!

I disagree. It is even easier not to budget, but that requires developing the habits that enable that, and changing habits is very hard. Mine have developed over the decades.



When I was young I controlled my spending by using cash and only spending what I had one me except for special purposes. Basically I would with draw a certain amount of cash each week and only spend that. I'd keep a small reserve of food in cash I ran out (or was ill and couldn't shop) - a few cans of soup and beans mainly.. If my bank balance was very low I would reduce the amount I withdrew, If it was higher and I felt like improving my lifestyle or if inflation was reducing my lidestyle and I could afford it I would increase it. That was a form of budgetting, but a minimal one.



When it started becoming easier to pay by card then cash I had to adjust gradually to not relying on whether I had cash in my pocket to control my spending and eventually I stopped my weekly cash withdrawals as I rarely use it now.

Terron

michaels wrote: »

I agree, the thought of just spending my income every month fills me with horror. Where are the savings for the unexpected? What about sickness, unemployment or and unexpected expenditure? Adjusting your spend every month to match a potentially wildly fluctuating income and expenditure sounds crazy. Suppose each month you spend £1500 and then one month the boiler broke costing £1500 - presumably all other spending on food, utilities etc would be reduced to zero that month to meet the matching spending and earning goal?!

I normally spend less than my income each month. At the start of the month money goes into savings automatically. When I became unemployed six years ago I cut the amount, though my redundancy payment enabled me to avoid stopping it entirely. I cut my spending a lot, dropping my weekly cash withdrawl to less than my JSA amount but it would not have covered my regular automatic payments, and I found alternative income after 5 months.



My savings payments go into my emergency fund. When I needed a new boiler 5 years ago I paid by credit card, and then before that was paid off withdrew from the emergency savings.



I have been significantly overdrawn twice in my life, the first two times I bought new homes. (I only avoided it the third time because the council made a mistake and didn't charge me council tax for 10 months.) I had, of course, arranged an overdraft facility in advance to keep the cost down.



Utilities are paid quarterly and automatically. If a bill were unexpectedly high my bank account that month would be low and I would notice and reduce my expediture/dip into savings as needed. I take reasonable efforts to keep them down. When I moved into my current home the bills were much higher. Well they were once I have a properly working boiler. I replaced all the failed double glazing and seal some gaps around windows, and I got a water meter.

Terron

fred246 wrote: »

Spreadsheets accidentally became sport for me. When we moved into our current house we were paying £1500 in INTEREST every month on the mortgage.

Wow.



When I last moved I had to pay cash for my new home as I did not have a job. I took a LTB loan on my previous home where I had paid the mortgage down to £4k. The new mortgage cost £535 per month interest only which is the highest payments I have made (and my first mortgages started with double digit interest rates). I remortgaged at a lower rate three years later and am now selling as rents in the area have dropped so I was barely making a profit.


I live in the NW and paid £179k for my three bed end terrace 20 yards from a country park five years ago.

Triumph13

I think there's probably a good research project for a behavioural economist somewhere in looking at what seem to be some pretty hard-wired differences between:

1. If I've got it I'll spend it, if I haven't I won't;
2. I like to know exactly where every penny went; and
3. As long as I'm comfortably within budget overall I don't care about the details.

I suspect these are much more to do with personality, but it would be interesting to see the correlation with income level - both current and during formative years. Nature vs nurture would also be an interesting question.

michaels

Triumph13 wrote: »

I think there's probably a good research project for a behavioural economist somewhere in looking at what seem to be some pretty hard-wired differences between:

1. If I've got it I'll spend it, if I haven't I won't;
2. I like to know exactly where every penny went; and
3. As long as I'm comfortably within budget overall I don't care about the details.

I suspect these are much more to do with personality, but it would be interesting to see the correlation with income level - both current and during formative years. Nature vs nurture would also be an interesting question.

I thought this - I would be terrified at the thought of having to adjust my lifestyle every month to reflect my income.

How could one even contemplate getting a mortgage or even a 12 month ast without having enough savings to hand to be able to smooth earnings if they fell due to sickness or unemployment or to cover unexpected expenditure when the boiler fails or the car dies?

Doesn't mean I know where every penny goes, just that I need to build and maintain a buffer to cover contingencies.

I also value averaging my income over my life rather than potentially earning and spending loads whilst working and then living on much less when retired.

Each to their own though.

Anonymous101

Triumph13 wrote: »

I think there's probably a good research project for a behavioural economist somewhere in looking at what seem to be some pretty hard-wired differences between:

1. If I've got it I'll spend it, if I haven't I won't;
2. I like to know exactly where every penny went; and
3. As long as I'm comfortably within budget overall I don't care about the details.

I suspect these are much more to do with personality, but it would be interesting to see the correlation with income level - both current and during formative years. Nature vs nurture would also be an interesting question.

I agree its very interesting. Its possible to be both 1 and 2 on that list though. I'd say i'm a pretty firm 2 where as Mrs Anon is a definite 3.


I used to spend whatever I earned on stuff. Scrimping on some stuff to buy other stuff I wanted more. Now I scrimp on more stuff so I can spend more on investing and hopefully having a more secure future. I don't actually think that there's too much difference in those situations.


IMO budgeting is a key skill no matter where you sit on the 2-3 scale. You need to know that you're not overspending even if you aren't concerned with the detail.

enthusiasticsaver

Triumph13 wrote: »

I think there's probably a good research project for a behavioural economist somewhere in looking at what seem to be some pretty hard-wired differences between:

1. If I've got it I'll spend it, if I haven't I won't;
2. I like to know exactly where every penny went; and
3. As long as I'm comfortably within budget overall I don't care about the details.

I suspect these are much more to do with personality, but it would be interesting to see the correlation with income level - both current and during formative years. Nature vs nurture would also be an interesting question.

Interesting observation and reading these replies I would agree. I fall between 2 and 3 definitely. Not so that I track every penny but I definitely like to see if I am overspending on each category but don't get too hung up if I have to transfer from one category to another on the odd month or so.

DT2001

We are definitely in group 3. We are both BR tax payers.
As we are self employed with quite fluctuating income we have a cash reserve to smooth out cash-flow.
I look at our expenditure in a similar way to business’s costs i.e. fixed, variable and semi variable. The surplus over our fixed (my definition is basic living exp) is then split between holidays and investment usually towards the end of the tax year.
It works for us, I think, because we enjoy looking for bargains and do not have expensive tastes.

badmemory

I actually find it difficult to imagine that anyone would not budget. But I guess if you are rich enough you don't need to bother. But budgeting is not about cutting down or doing without, exactly the opposite, it is about making sure that the money is there for the things you want at the time you are going to want them..


It is 25 years now since I have had to tell myself well you may want something but it is not going to happen. This didn't happen by chance but by planning. I was asked the other day what I wanted for Xmas, well nothing really as I have been able to get anything I wanted, so chocs & a jigsaw it is then! Perfect!


Planning is everything. I spend the time between Xmas & New Year doing the spreadsheets for next year. Please note the s on the end of spreadsheet. But just because HMRC think I should no longer file self assessment does not mean I no longer need to get the figures. After all they haven't got it right yet & it is my responsibility that they should get it right not theirs. Don't believe me - check it out & they can come after you up to 20 years later.

jimi_man

I think the problem is with the term ‘budgeting’ and how it’s defined. On that recent scale of 1 to 3, I would guess I’m a 3. However that’s not to say I have an irresponsible attitude to budgeting. I know how much money comes in every month and I know how much goes out on routine stuff. Between those two figures I know there is sufficient money left over that we don’t spend. That amount is generally the same every month. Every couple of months I’ll put the difference somewhere, either in a savings account, ISA, pension or just in the deposit account.

I also know that if we have to pay (an example given above) £1500 for the boiler then, depending if there has been any other non-routine expenditure in the same time period, I might need to check the account to make sure there is sufficient in there, though I do keep a buffer in the current account to cater for things like that. So in that example, when I do my ‘transfer’ of the difference, then it would be less because of this. Or in the opposite scenario, with one son having recently finished university, I now notice there is a fair bit more that we haven’t spent.

Most of this is done mentally rather than keeping a spreadsheet, since it’s virtually the same figures that go in and out every month and I’d be just putting the same figures in and getting the same figures out which I see as rather pointless. If the boiler breaks then it has to be paid for whatever, and keeping a spreadsheet is not going to change that. I don’t anticipate retirement being any different, as the same figures in and out will continue (broadly).

Whether this approach is considered budgeting I guess depends on your point of view.