Budgeting.  For many, putting a budget together is as much fun as watching paint dry or trying to herd cats.  One is boring; the other futile.  Understood. However, how can anyone prepare as accurately as possible for retirement without having a fairly clear picture of where their money is going and how much is saved?  Therefore, being realistic about your income and taking a hard look at what it looks like in the present, versus how you plan to spend in your retirement years, is necessary, meaningful, and can help make the transition much less stressful.

Retiring is a big deal; and yes, it is stressful. There’s a lot of emotion that goes with the decision to step away from working full time.  We identify with the work we do, we have work friends that we only see at work, and we find personal value in what we do in our job. True.  But, retirement has its own rewards – your time is your own to try something new – a new career, learn new skills or hobbies, travel, volunteer, or whatever you’ve dreamed of but never had the time to try.  The harsh reality is that some of those options require money, so planning ahead to fulfill those dreams is important.

First of all, a disclaimer: these suggestions are not from a financial adviser, but from the author’s firsthand experiences and observations.

The number one suggestion prior to setting a retirement date is to seek professional financial advice.  Be prepared to share your current spending habits, your budget as it now stands (in whatever shape you have it in), your financial portfolio, investments, and your expectations for what you’ll do in retirement.  You’ll also need to have a target retirement date in mind.

If you’ve never prepared a budget, do it now before you meet with the adviser.  It’s not that hard to do.  If you’re familiar with spreadsheet software, that’s your best tool, but paper and pencil work well, too.  List in column one all your monthly bills (home, auto, utilities, insurances, etc.). List the basics first and then others that you might pay monthly.  Be sure to have several miscellaneous headers to capture “once in a while” expenses. Have a total line for expenses. Next, list all your income sources and total.  Subtract income from expenses, and that’s what’s left at the end of the month.  Now that you’ve identified where you spend your money, you need to project how much that expense is by month.  You could calculate an average; however, just listing the most recent amount paid works.  Now you have your baseline.  Add rows for months across the top of the page for actual entries.  That’s it.  You have a working budget tool for planning and tracking.

Now comes the challenge.  Look at what you’re spending right now; look at what you’ll expect as income in retirement.  Surprise! It’s time to trim the budget. There are expenses that can easily be trimmed down as a retiree.  Wear and tear on your car won’t be as much, neither will fuel for driving since you won’t be heading to the office and back every day.  Your clothes budget can drop (no more corporate approved dress codes to follow).  Since you can easily eat at home, the money you spent on lunch and perhaps breakfast can now be saved for other purposes.

After you’ve had a chance to digest what shape your budget is in, look at any big-ticket items that can be paid down and eliminated prior to retirement.  Look at needs versus wants.  Actively work to get credit cards paid off.  If you’re not a person who saves money easily, set-up an automatic transfer of a set amount into a savings or investment account and make that a new line item on the budget.

It’s well documented that outliving your money is one of the biggest fears in retirement.  Being proactive and seeking professional advice can offset that fear and give you the tools for planning a fulfilling retirement.  You’ve worked for it.  You’ve earned it!  Happy retirement!