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Before we can set about making the most of our money it is sensible, even
essential, to work out how much we have coming in and going out on a
weekly or monthly basis. It provides a valuable self-help source of
help with personal finances. Only when we know how much we've got,
can we start to make decisions about how to arrange our finances so
that we can make the most of our money.
It will also help us to make the choices that we will make in
retirement. Retirement is all about choice and, unless we are
extremely wealthy, we will need to make choices about finance in
retirement. We will have so much money to spend on ourselves and
we will have opportunities that we hope to realise. If our money
allows us to take all those opportunities we have no problem. On
the other hand, if we decide that we want to do more than we can
afford, we have to make choices. We can only make sensible
choices once we know how much we will have to spend.
This means constructing a budget. This can serve a number of
purposes, each of which is useful in its own right and, when you
put them all together, makes it an extremely valuable source of
help with finance:
- It allows us to examine how much surplus, if any, we
have after we have dealt with the essentials
- We can see if all our expenditure is necessary and
worthwhile
- It helps us to judge if there is a better way of getting
our money to work for us
- It helps us to judge how we could spend our money better
so that it goes further
To see how you might go about constructing your budget, go to
Constructing a Retirement Budget
Making the Most of our Money links
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For those who are approaching retirement and therefore
thinking about about finances, you can make an attempt at
doing a budget before you retire. Then look at your
budget closely and in some detail for the six months or so
following retirement, so that you can be sure that you have an
accurate assessment of your financial situation. For that
reason, it is sensible not to make any big decisions about
finance in those first six months, but to wait until you are
sure.
So, if you are approaching retirement, look at your income
and expenditure currently and how you think it will be in
retirement, assuming that you will be doing nothing different.
So you will need to do the exercise twice - incoming and
outgoings both before and after retirement. This will allow you
to make some comparisons so that you can see the difference in
the money you think you will have available once you have
retired. Try to think of every single item of income and
expenditure that you can - no matter how small, it all matters.
Then, once into retirement, for those first six months or so,
keep an accurate record of all your incomings and outgoings.
After that period, analyse it closely, see what your finances
look like, compare them to before retirement and then start
making decisions on how to make ends meet and how to make the
most of your money.
When you look at your finances initially, before you retire,
it may be that you decide that you will need to defer
retirement, if you can. If that's not possible, you may then
conclude that you will need some part-time work in retirement.
If so, look at our guide on
Part-time Work. For others of you, the decisions will be
around whether you are going 5-star or 4-star on your annual
round the world trip but, in essence, the issues are the same.
Whatever your situation, most of us want to make the most of our
money so that we can afford to do everything that we can, as
best we can, within our sphere.
The good news is that, in retirement, more people are quite
pleasantly surprised by how much they have left at the end of
the week or month than are horribly shocked. There are a number
of reasons for this:
- You keep more of your income because you don't pay
National Insurance or pension contributions (assuming you
were in a pension scheme at work). You also pay less tax
because your income is lower
- There are usually expenses involved with work -
travelling expenses etc - that are not there in retirement
- Many people try to pay off debt (mortgages etc) or buy
items that they think they will need once they have retired
whilst they are still working
Having said that, there are some expenses that will probably
increase, such as heating and lighting. So it is important to
make the most of our money so that the extra expenditure is kept
to a minimum.
If you are not retiring but are still concerned about making
the most of your money, most of the information in this Guide is still
relevant. Finances are brought into focus when we retire, but if
you are concerned about finances at any stage of your life, it
still makes sense to make a budget, so that you can assess your
income and expenditure so that you can see if you are making the
most of your money. The first place to start when you want help
with your personal finances is with yourself.
The other pages in the guide will also be relevant to you, so
whether you are about to retire, are already retired or are
thinking about retirement, click the links in the box to find
out more.
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