Worried about outliving your money? With different budgeting methods, you can avoid outliving your personal finances.
Our credit union offers an array of services that can help you execute different budgeting methods and subsequently have enough monies to live comfortably now, and during your golden years.
Trust us when we say, you’re not alone in worrying about outliving your money.
Angus Reid Poll Reveals That You’re Not Alone with This Concern
According to a recent survey conducted by the Angus Reid Institute, outliving your money is a common concern shared by many Canadians.
The survey revealed that roughly two-thirds of Canadians over the age of 30 are worried about outliving their savings, regardless of their income levels.
If you share this same concern, speak with one of our warm and welcoming professionals at our credit union. We’re happy to go over your current finances and put your mind at ease by offering some investment or savings solutions.
Different Budgeting Methods for Retirement
The concern of outliving one’s personal finances is often linked to retirement. A day of work can drag on, but the years of work fly by and before you know it, you’re a few years shy of retirement—or so you thought.
It’s normal to want to live comfortably during retirement and not have to worry about whether or not you’re going to run out of money. Pre-planning for retirement is crucial to not outliving your retirement funds. A crucial part of pre-planning is assessing what costs you’ll likely incur during retirement.
Your biggest expenses in retirement are likely going to be fixed costs – things like your housing and transportation. However, you need to get an idea about what you need to do now in order to prepare for costs during retirement; you won’t have the same income that you currently have.
Write everything down that you currently spend money on – entertainment, medical expenses, mortgage or rent, travel and utilities – whatever you’re spending money on, on a regular basis. Live on that budget for a while, then go back to your spreadsheets, figure out where you made mistakes and rebuild the budget. If your budget isn’t working now, you have a chance to fix some things while you still have regular income hitting your account.
If you’re tired of not living within your means or worried about outliving your funds come retirement, below is a list of different budgeting methods to help you get started on your path to ultimate financial security.
Different Budgeting Methods: The 50/30/20 Budget
The 50/30/20 budget is a simplified plan in which you break down your expenses into three categories: needs, wants, and savings.
50 percent of your take-home pay should go towards needs, 30 percent should be devoted to wants, and 20 percent should get put into savings.
Dividing needs from wants can be tricky. “Needs” include only your vital necessities. You might think that groceries are a need, but there are items that are “wants.” For example, the package of toilet paper you buy at the store is a “need,” while the tub of ice cream you buy at the store is a “want.” We understand that it’s likely you already understand the difference between “wants” and “needs”, but this understanding this dichotomy plays into a larger understanding of savings.
Cutting down on “wants” is an obvious and simple way to save money. While making your shopping list, identify which items are needs and wants and how much each item approximately costs. Once this list is completed, cross off the “wants” you and your family can live without. Tally up those eliminated “wants” and times that amount by 4; that amount could potentially be your savings per month.
Getting into the habit of doing this exercise regularly can have profound results.
The 80/20 Budget
The 80/20 Budget is even more simple than the 50/30/20 method. Under this strategy, you simply skim your savings off the top, and then freely spend the rest.
Twenty percent is the minimum you should save. You should put at least 10-15 percent away for retirement. You can use the rest for emergencies, buying your next car in cash, home repairs, and other long-term savings goals.
You can also modify this into the 70/30 budget, 60/40 budget, or even the 50/50 budget, depending on how aggressively you choose to save.
The beauty of this budget is that once your savings are dealt with, you don’t need to worry about where the rest of your money is going. This is also known as the “Pay Yourself First” budgeting method.
The Sub-Savings Accounts Method
With the sub-savings account method, you can decide how much money you need to save by funnelling your money into sub-savings accounts based on your goals.
How do you do this? You can start by opening various savings accounts and give each one a nickname based on specific goals, like “Spring Vacation” or “future home repairs.” Then, you set a goal (for example, saving $1,000 for your spring vacation trip by next January and $800 for future home repairs within the next two months).
Lastly, divide the dollars by the timeline to see how much you should save each month.
Now you can auto-draft money each month from your checking account into your multiple savings accounts. Once you’re done, spend the rest of your funds as you see fit.
Online Tools to Support Different Budgeting Methods
Once you’ve built a budget, you can combat the risk of outliving your money by using a number of online tools. These online tools can help you estimate the amount you’ll need to last your lifespan.
When plugging in the numbers, you can factor in varying interest rates, savings and inflation to help come up with a realistic amount. You can also calculate how your finances would fare in the event your spouse dies before you do or becomes disabled.
The number you get will help you determine what you need to do to reach your goal.
Registered Retirement Savings Plans (RRSPs) can help you budget for retirement. RRSP contributions are tax-deductible and income is tax-sheltered until withdrawn. This means faster growth for retirement savings because earned interest compounds without erosion from income tax.
AT OCU, many different RRSP investment options are available. All options are flexible enough to meet any investor’s retirement goals. Ready to invest? Our OCU Advisors are ready to help you invest so you can have enough funds for retirement.