To Budget or Not?

Richard Quinn

I’VE NEVER BUDGETED, meaning I’ve never planned every expense in detail. But I know many people do, especially as they look ahead to retirement.

This doesn’t mean I don’t know what I spend. My utility bill is $127 a month, my homeowners’ association fee is $870, my property taxes are $3,117 a quarter and my BritBox subscription is $5.99 a month. Or is it $6.99?

By the end of each month, our two credit cards are paid in full. There may or may not be much left in our checking accounts, but our spending never exceeds what’s in the bank. Our “budget” is set for us.

I didn’t retire until age 67 because I wanted to be sure I could generate income equal to 100% of my base salary, while also keeping up with inflation. Sure, I may have a shorter retirement than others who retired earlier, but mine is financially less stressful.

Many of those who are obsessed with keeping a budget are seeking to retire in their 50s. They’re trying to stretch their savings over a retirement that could be longer than the years they worked. I fear that may prove impossible.

Some people say they need a detailed budget to determine how much they can save. For example, according to, “Without a holistic picture of how much you spend every month, theres no way to set savings, debt repayment, or investment goals. It’s a must, folks.”

Sorry, that’s backward. You save first and then see what you can spend.

Listening to a Retire with Style podcast, the commentators took two different approaches. One favored a very detailed budget. The other favored my formula of NE-S=S, meaning net earnings minus savings equals spending. This formula gives you your de facto budget.

Why stress over budgeting? If you’re about to retire, I maintain your overall spending will be the same as before, unless you’ve just paid off the mortgage. I hear someone saying, “Wait, once you’re retired, you’ll no longer be saving for retirement, right? Can’t you live on less income?”

Yes, if you’re one of those folks who saves 30% to 40% of your income, you may have a point. But for the great majority of Americans who save far less, you’ll still need to save something when retired because your spending will rise each year, thanks to inflation.

I’m prepared to be criticized for repeating myself. But I feel my approach is the safe one. Our monthly “spending” includes saving something each month, plus an allowance for discretionary spending such as travel, plus a provision for surprise expenses like the two new tires I recently bought, several thousand dollars in car repairs and $8,000 in dental bills.

Your spending will change over time. But I firmly believe there won’t be a significant decline. Keep in mind that many unforeseen expenses aren’t linked to your income. The cost of a new furnace will keep rising, no matter how much income you receive this year.

A 2014 survey claims that, after three years, retirees are living on 66% of pre-retirement income, on average, with more than half saying they live as well or better than when they were working. Is that possible? I’d like to see their pre- and post-retirement budgets.

Thoughts on budgeting vary widely. A comment from a friend has me bumfuzzled: “I started keeping a budget for one main reason. Financial advice websites kept saying we needed to have $X in annual income. I knew that wasn’t true since we lived on much less than our income for many years and lived comfortably, while putting away quite a bit. So, to determine if we could afford to retire early, I needed to figure out our real expenses/spending.”

No website can accurately say that you need $X in income. At best, it can estimate the financial resources you need to generate $X in income.

I just read a comment on a retirement blog. The commenter had $550,000 in savings, plus Social Security, and asked if that was sufficient to retire. What kind of question is that? Maybe yes, maybe no.

If, at the end of the month, there’s no money left in the bank, or if credit card balances can’t be paid off in full, an assessment of spending is necessary. That’s when a detailed look at where the money goes is important. Make adjustments and move on.

If that’s not your situation, you don’t need to spend hours constructing a detailed budget. That’s especially true if you’re trying to predict spending over decades of retirement—unless you just like playing with numbers.

My oft-maligned notion is that you start retirement with income equal to 100% of your base salary. For most people, Social Security will get them to 40% of that target. That 100% income replacement will provide the financial cushion necessary for a less-stressful retirement—but you might have to work past age 60 to achieve it.

Richard Quinn blogs at Before retiring in 2010, Dick was a compensation and benefits executive. Follow him on Twitter @QuinnsComments and check out his earlier articles.

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