Goodbye to the Budget
First Some Definitions
Budget: A budget is a plan for where you want your money to go. Budgeting is looking forward to the future. You give each dollar of your income a name and a purpose. A budget helps you to determine how much money you want to set aside for savings and retirement.
Expense Tracking: Expense tracking is recording your spending, so you know where your money went. Expense tracking is looking back to what happened in the past.
A budget will be ineffective if you don’t track your expenses. But you can track your expenses without having a budget.
Why We Use to Budget
We have always been big believers in having a budget. Throughout our married life we have kept a budget. As teachers our family household budget ran from September to August because we would get our yearly raise each September. Each expense had a line item, and we would put aside money each month for expenses that occurred only once or twice a year. For example, even though our homeowner’s insurance was due once a year, we would set aside 1/12 of that amount each month. After setting up the budget based on our yearly raise, we would then track our expenses each month. Our budget included line items for retirement savings, emergency savings, and savings for short term needs like a replacement vehicle.
According to Thrivent, budgets are important for the following reasons.
Keeps you from overspending.
Enables you to manage debt and build credit.
Gets you moving toward both short- and long-term goals.
Prepares you for emergencies.
Makes saving for retirement easier.
We agree with each of those reasons and give credit to budgeting for helping us to successfully save for retirement and meeting our financial goals for nearly 45 years.
Why We No Longer Budget
When we retired, we decided to give up budgeting. Here are some of the reasons why.
After 45 years of married life, we know how much we typically spend each year. We have years of spreadsheets and years of experience on how much it takes us to live. So instead of a budget, we set a target amount we wanted to spend for the year.
We do continue to track expenses each month by categories. So, at the end of each month, we know how much we spent that month and the cumulative amount we have spent for the year.
The main reason we had a budget was to give us the discipline to set aside savings for future needs and retirement. Now that we are retired, we are no longer setting aside income for savings. Instead, we are living off those savings.
Our first three years of retirement we planned on living off a set amount of savings and Tammie’s social security. We set aside enough savings for us to pay our regular expenses and to do extra travel and entertainment. Tracking expenses at the end of each month helps us to see if we are staying within the amount we have set aside.
When I begin receiving my social security at age 70 starting in December 0f 2025, we plan on meeting our regular expenses on both of our social security incomes. We plan on using IRA withdrawals to meet our travel and entertainment expenses and other big infrequent expenses (home repairs, replace vehicles, emergencies). If the stock market has a bear market or a crash, we can still live off of our social security incomes and just decrease our travel and entertainment costs.
Summary
We think having a budget is necessary for planning and saving while you are in your working years. After you retire, budgeting may not be necessary but tracking expenses is necessary. Having safe income sources like social security or an annuity to meet your basic needs makes for a worry-free retirement.