As you plan for retirement, it’s always a good idea to examine your budget more carefully. You can reap two primary benefits by cutting back on expenses: First, you free up more money that you can use to pay down debt or stash in your Thrift Savings Account. Second, you can reduce your living expenses so that easing into retirement will feel easier.
However, you might soon discover that the plethora of money-saving advice you’ve been hearing is not always completely accurate. Sometimes, well-meaning budgeters even make mistakes when trying to save money. Watch out for these common pitfalls as you adjust your spending…
Digital billing and/or automatic payments can be tricky. Automating your bills can be one way to make life easier. You won’t forget to pay, and therefore you won’t be subject to late penalties. The downside of accepting digital bills rather than paper, or of signing up for automatic payments, is that you might neglect to look more closely at the bill itself. Over time, charges can creep up so that you’re paying more than you should for services like cell phones, cable, internet, and more.
If you do set up digital billing or automatic payments, make sure you’re still examining the bills regularly.
You pay down debts… but in the wrong order. Getting out of debt is a worthwhile goal, but the way you tackle the task can make a difference in your spending over time. Many people pay off smaller accounts first, because it feels more satisfying, but you should actually prioritize the accounts with the highest interest rates. After all, a smaller amount of debt at a lower rate won’t be as expensive over time.
You don’t take advantage of pay raises. Each time you receive a pay bump, are you devoting at least half of the raise toward your Thrift Savings Account or paying down debt? It’s fine to enjoy the fruits of your labor, but remember that raises are opportunities to better prepare for the future.
You aren’t discussing things with your spouse. You could craft a rock-solid strategy for better budgeting, but it won’t matter if your spouse doesn’t know about it. Make sure the two of you have discussed spending and saving, and you’re on the same page. Try to focus the conversation around your mutual goals for the future, rather than a criticism of their monetary habits. Most people respond best to constructive planning.
And of course, we hope that you will get in touch with us if you have questions about retirement planning, your Thrift Savings Account, or budgeting with the future in mind. We can help you identify areas of strength and weakness, and tweak your financial strategy toward a more stable retirement plan.
