preretirement financial planning exercise
- Posted by e2 on 07.09.09
- Tags Modern Family, The Evolving Family
As a preretirement financial planning exercise, a few years before you plan to retire, work out a monthly spending program for a 12-month period. Use the following categories:
Food – meat, vegetables, beverages, dining out, dinner guests.
Housing – mortgage or rent, real estate taxes, property insurance, telecommunication devices, heat, lights, cleaning supplies, repairs, furniture.
Clothing – new apparel, laundry, dry cleaning.
Medical – doctors, dentists, hospital bills, glasses, prescription medicines, drugs, health insurance premiums.
Transportations – automobile payments, gasoline, oil, automobile repairs, automobile insurance, bus and taxicab fare, other.
Personal – haircuts, beauty, parlor, cosmetics, tobacco, postage.
Recreation – books, films, magazines, newspapers, audio visual devices, computers/note book, trips, theater, club dues, sport, and cultural events.
Insurance and taxes – social security taxes, income taxes, life insurance premiums.
Miscellaneous – church/religion contributions, charitable contributions, gifts, savings.
These nine items will give you a clear idea of where your income is presently being spent. Chances are that your heaviest expenses will be in the areas of taxes, life insurance, housing and utilities, personal expenses, food, and transportation.
When you have determined your average monthly expenses (add costs of each month in each category and divide by 12), then estimate how much you expect to spend in these categories after retirement. Be realistic. In most categories you may find that you are able to reduce expenses – personal, insurance and taxes, housing. In others, you will find that your expenses before and after retirement are approximately the same – sometimes a little less, sometimes equal, and sometimes a little more.
