When you think about living frugally during retirement, what comes to mind? If you imagine a life of deprivation and self-denial, it’s time to rethink your definition of frugality.
Frugal living is just a matter of planning your spending and making the most of every dollar. Living frugally can actually mean living better – if you know what’s coming in and you have well-defined priorities for spending your money, you’ll be able to spend on the things that are most important to you.
The first step is to create a good, workable spending plan. You’ll want to write down exactly what your total income is, and then account for all of your expenses. When you’re listing your expenses, don’t forget annual expenses like property tax and Christmas spending. If you’re not sure what your expenses are, it’s a good idea to track your spending for a month or so to get a feel for where your money is really going.
Once you know what your actual expenses are, you can adjust them based on your priorities. Obviously, basic living expenses will come first, but you may want to rethink even these things in light of your new lifestyle. For example, some people find that moving to a smaller home is more in line with living as a retiree. There’s less upkeep involved, and utilities and taxes are lower. Also, you may be able to spend less on clothes and car expenses now that you’re no longer going to work every day.
With your spending plan in place, you’ll want to stay aware of what you’re actually spending so that you can compare your actual expenditures to your spending plan, and make any needed adjustments.
Finally, here are a few tips:
- Avoid debt like the plague. Taking on debt during retirement is a terrible waste of money, because when you have debt, you’re spending money on interest payments. Instead, make every effort to plan ahead so that you can pay cash for all of your purchases – even major ones.
- Make sure you have an emergency fund. One of the quickest ways to derail your spending plan is to have an unexpected financial emergency and not have cash available to cover the expense.
- Take advantage of senior discounts – including looking into whether your bank offers a fee-free senior checking account.