Click here to print this page

Planning Retirement Online

Constructing a Retirement Budget

 Before we can make sensible choices in retirement about how to spend our money, we have to do two things:

1. Construct and analyse our budget...

2. Decide what it actually is we want to spend surplus money on...

1. Construct and analyse our budget, so that we know exactly how much we have for discretionary spending. To learn a bit more about the benefits of having a budget and on how to use it once you have it, go to the Analysing our Finances page.

Making the Most of our Money links


The budget we are talking about here is simply a list of all your income and expenditure. Once you have listed them, take one from the other to find out how much surplus you have to spend on the things you want for you and your family in retirement.

Income can usually be put under the following categories, although you might have income from some other source(s):


  • Salary (if you are working)
  • Pension(s)
  • Interest from savings
  • Dividends/income from shares and other investments
  • Net rental income from property
  • Benefits/allowances

Expenditure comes under some or all of the following headings (although, again, you might have some other form of expenditure personal to you)

  • Mortgage/rent
  • Council tax
  • Water rates/meter
  • Ground rent/administrative charges for accommodation
  • Loan/credit card repayments
  • Food and drink
  • Rentals (TV, video etc)
  • Heating
  • Gas
  • Electricity
  • Phone(s)
  • Car insurance
  • House and contents insurance
  • Motoring
  • Fares on public transport
  • Entertainment - cinema, theatre, pub etc)
  • Subscriptions (magazines etc)
  • Newspapers
  • Current hobbies
  • Holidays
  • Clothes

You may be able to think of other expenditure that you have and, indeed, you should try to do so. Think in terms of daily, weekly, monthly and annual expenditure. They all count! Once you have done this exercise, then you can proceed to the next step:

2. Decide what it is we actually want to spend our surplus money on, once we have dealt with the necessary spending. You may feel that you can reduce your current spending by cutting out various things - subscriptions to magazines, perhaps. That will clearly give you more surplus and thereby expand your choices.

For some people, choosing will be a relatively simple task. If we want a quiet life and we don't have much money to spare either, then these choices will be limited. The more ambitious our plans and the more discretionary spending power we have, the more difficult our choices probably become, because more things become possible (unless you are one of the very lucky, very rich people who can afford anything and everything, in which case choice won't come into it).

So you might need to choose between various hobbies, for example. If you feel that you want to take up lots of pastimes, you might have to decide whether to join the exclusive golf club or play on the municipal course, thereby freeing up more money to do other things.

You might choose to take out Health Insurance or Long-term Care Insurance. You might want to do some Inheritance Tax planning or, alternatively, how to spend every last penny before you die.

You might choose to do some work, so that you can afford to pay for more of the opportunities that you see in retirement. If so, look at our Guide to Part Time Jobs and Work.

Whatever your choices, you need to make them in light of how much spending power you have. Constructing a budget based on the above checklist should enable you to do this.

For more help in making the most of your money in retirement, click on the links in the box.

This Guide is written by Retirement Specialist Dave Sinclair supported by members of the LaterLife team. As well as writing on retirement matters Dave is Training Director at LaterLife and responsible for the content and continuous improvement of LaterLife's Retirement Courses.
Back to Making the Most of our Money

Site map and site search


Advertise on