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Chapter 2: Tools

Chapter 1: Gather Information

Two useful tools you can use to improve your retirement-income plan are running a Social Security analysis and creating a budget.

Social Security analysis: This allows you to get an even more accurate projection of your benefit because the online Social Security estimator we used in the previous chapter does not factor cost-of-living adjustments or spousal options. There are two ways to have a more accurate analysis run:

  1. Go to the Social Security website and view the page titled “A Comparison of Free Online Tools for Individuals Deciding When to Claim Social Security Benefits”. Scroll through the page to read comparisons of the free online tools for individuals deciding when to claim their Social Security benefit.
  2. Check with a local financial advisor. Many advisors have software programs that can project and estimate your Social Security benefit.

Budget: You must create a budget! Budgets help identify how much you will need every month to retire comfortably. If you don’t have a budget in place when you retire, you will be forced into one and retirement might not be as comfortable as you imagined.

Be proactive! There are things you can do now to ensure a financially-healthy retirement. Creating a pre-retirement budget helps track your current expenses and that information can be used to project your estimated expenses during retirement.

Items in your budget may include:

  • House payment
  • Vehicle payment(s)
  • Debt payment(s)
  • Taxes:
    • Income taxes
    • Property taxes
    • Vehicle taxes
  • Insurance:
    • Vehicle(s) insurance
    • Property insurance
    • Health insurance
    • Long-Term Care
    • Life Insurance
  • Medical:
    • Copays and Coinsurance
    • Prescriptions
  • Utilities:
    • Water
    • Gas
    • Electric
    • TV / Internet
    • Phone:
    • Cell
    • Landline
  • Charitable donations
  • Vehicle maintenance
  • Groceries
  • Dining out
  • Gasoline
  • Maintenance
    • Gardener
    • Housekeeper
  • Household supplies
  • Home improvement
  • Entertainment
  • Gym
  • Clothes
  • Pet(s):
    • Food
    • Veterinary
    • Miscellaneous
  • Vacations
  • Gifts
  • Emergency Fund
  • Other

Review your bank and credit card statements for the past 12 months for expenses you may have missed. These are often available through online banking if you do not have paper copies.

To get a more accurate picture of how you spend your money, use the information from your statements to estimate your average expenses. The easiest way to determine your expenses is to categorize them, add up the monthly cost for 12 months’ worth of bills and then divide that number by 12 to get a true monthly average.

There are several ways to create a budget. Pencil and paper might sound archaic but it gets the job done. Spreadsheets can be useful and there are even online resources available. The site Calculator Net offers free use of a budgeting calculator. The site WikiHow offers a free tutorial on how to create your own budget spreadsheet.

Budgets create accountability for spending habits and allow you to see opportunities to make changes and further improve your budget and thus your retirement.

Chapter 3: Creating Projections