I hate budgeting

There I said it – I hate budgeting. I do, I always have and I know I’ll never like it and will never stick to a budget. What I mean is I won’t sit down at the beginning of each month and say I’l spend no more than $300 on dining out and no more than $200 on groceries or whatever. You can already see my priorities in that I listed a higher amount for dining out than for groceries.

I know it’s important to establish an amount you can spend and we do, but we do it more organically. If it feels like we’re spending too much for the month we cut back. As I approach retirement I’ve been feeling a little uncomfortable with the whole “I won’t budget” thing. Pretty soon I’ll be on a fixed income (shuddering over here) and I’ll have to know how much I can spend a month and I’ll have to keep within that budget. I think that is why I keep “one more yearing”. You know, that concept where someone should be retiring but just keeps saying if I work one more year, I’ll have enough, or I won’t worry as much. Well, I’m a pretty good worrier so I suspect I could work one more, five more, ten more years and still never think I have enough. But, I digress – the whole budgeting thing and knowing how much we spend is critical to knowing if we have enough to retire. Since retirement is looming I’ve been digging into our finances to get a handle on where all of our money goes.

I’ve discovered something kind of astounding to me – for the past 7 years our credit card bills have been almost identical year over year. There was one anomaly – when we moved – note to self moving is expensive – but other than that our credit card spending was within 1 – 2 thousand dollars of each year, without even trying.

I was quite happy to find this out since I was concerned our spending was all over the place, and it’s nice to realize that it really isn’t. I do admit that what everyone says is true – the way to retire with peace of mind is to know how much you spend annually. If you know that you can back into roughly how much you need for the rest of your life. Generally, if you follow the common 4% scenario and know what you spend you’ll know how much you need to retire.

Let’s say you spend $50,000 annually. Using the 4% rule that says that if you withdraw 4% annually your money should last you 30 years, you would need $1,250,000 to retire comfortably, if you’re retiring at around the average American retirement age of 62. ($50,000/.04 = $1,250,000). There are varying points of views out there as to whether this is too aggressive or too conservative but that’s something you have to decide for yourself.

I suggest if you don’t know how much you are spending in a month, in a year, that you do the exercise that I did and figure it out. If you don’t use a credit card then track your daily spending in a spreadsheet for a year. You’ll either be pleasantly surprised or you’ll realize that you need to cut back and can start taking those measures.

Focusing on my retirement priorities, such as travel, will be much more fun now that I have an idea of what amount we’ll need to have the retirement that we desire.