The Importance of a Retirement Spending Plan
A spending plan is a guide that helps you know you are going in the direction you want financially. It’s often said that if you set off on a journey without a map to your destination, you’ll never get there. The same is true with your finances: you may have dreams and plans, but if you don’t set up a roadmap for reaching them and you don’t measure your progress, you may find at some point you’ve been moving in the wrong direction—sometimes to a point so far off you can never make it back. A spending plan is important so you will know:
- How much money you need each month for expenses.
- How much money you can spend each month on things that are not life’s necessities.
- Whether you are living within your means.
- How long your savings is likely to last given your spending habits.
- Whether an adjustment to your spending may be necessary to meet your goals.
A spending plan, very simply put, allows you to be in control of your money. You, by creating, tracking and monitoring your spending, are telling your money how it should be spent—it puts you in the driver’s seat with your finances. Tracking your spending also allows you to correct overspending before it becomes a long-term threat to your financial well-being in retirement. Knowing where your money is going helps you stay focused on what’s really important to you in your retirement years.
Income Strategy allows you to enter your spending at a high-level or in a very detailed way. We recommend that you provide as many details as possible so that you can more accurately track past expenses and predict future ones. Within Income Strategy, you can enter regular ongoing expenses such are your monthly payments, but you can also enter one-time expenses such as a vacation or education expenses for a child or grandchild. Additionally, you can enter expenses in phases. For example, perhaps you want to have one monthly spending plan for the first five years of retirement when you plan to travel extensively, and have a different plan for your later years in retirement. With Income Strategy, you can choose your level of spending detail.