This week’s theme on the Retirement Quick Tips Podcast is: Crafting Your Retirement Budget

Today, I’m talking about a critical aspect of crafting your retirement budget: categorizing and ranking various spending goals.

Essentially, what you’re doing is listing out various categories of spending in retirement that are beyond your basic needs. This allows you then to rank and prioritize these various goals, differentiating between Needs, Wants, & Wishes.

• List different spending categories (travel, health care, etc) and examples of which ones are needs, wants, and wishes. I like ranking them in order of importance - 10 is absolute necessity, can’t do without need. 1 is take it or leave it. Try not to have more than 1 or 2 things with the same ranking. Makes it easier to figure out where you’ll be willing to compromise if you can’t afford to have all your wants and wishes

• Will vary - health care is a need, charitable giving will be a need for some, a want for others, and a wish for other

• Understanding where each of your spending goals lies on the spectrum of importance to you will help you make some helpful decisions. 

• Maybe you really want to spend $10,000 a year on travel. But you also want to join an athletic club that costs $250 a month. If you budgeted for both of these, you’ll know if you can afford them both. But let’s say you can’t afford to do both. Ranking needs, wants and wishes helps with this. Let’s say that you ranked the athletic club as 7, but travel as an 8. The compromise might be that your travel budget has to drop to $7,000 so you can afford the athletic club membership. Or you may decide that because travel is more important and higher up on the needs, wants, and wishes spectrum, that you’ll forgo the athletic club membership all together so you can travel in the way you want to. After all, you can always workout at home instead…

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance