Once you stop working and no longer receive a monthly income, it becomes incredibly important to manage your cash flow. If you get carried away and eat into your savings too quickly, you may find that you run out long before you expected too. No matter how big your nest egg is, cash flow and money management will become a big part of your life. If you have never been too good with your finances, now is the time to start improving! If you are worried about money during your retirement, we've come up with this guide to managing your cash flow to make things easier for you.
Budget Before You Retire
While you are still working, draw up a budget for your retirement. This will help you plan out how you will use your money and will also help you keep track of any ingoings and outgoings. You should take into consideration all your savings and any income you will get from pensions and benefits from the government. Try to see if you can make all this stretch to give yourself the same monthly wage you were getting from your job. If possible, try not to dip into savings too much. It is always best to save them as an emergency fund. It is very important to draw up this budget before you retire. Then if you notice any major shortfalls, you can start saving appropriately while you are still being paid.
Plan Spending Cuts
Be prepared to cut down on your spending during retirement. You may not have the same monthly income as you had during full-time employment. To make sure you don't use too much of your savings to continue your lifestyle, it is much better to try and curb your spending habits. If you cut costs in everyday spending, then you may even find you have more to spend on holidays and other one-off purchases.
Continue To Save
Just because you are retired doesn't mean you should stop trying to save money. If you find that you have a surplus of money from income every month, be sure to put it one side and save it for a rainy day. It is always worth saving it in investments that will generate income and growth. For example, in high-interest bank accounts. However, when you are looking for investment opportunities, you need to consider liquidity. This is how quickly you can access your money. The sooner, the better during retirement. Try to set up three main savings: for short-term goals, long-term goals, and emergencies.
Try To Increase Income
This isn't so easy to do when you aren't working, but that doesn't mean it is impossible. If you are yet to retire, see if it is possible to give your pension a boost. You can do this by increasing your monthly payments. The more you are able to accumulate in your overall pensions means that once you do retire, it will pay out more each month. You should also see if you can afford to defer the date on which you start claiming your pension. This will give you longer to save money in it, and the savings will also have longer to build up and collect interest. Another way to increase your income would be to sell off assets in order to add more cash to your savings. If you have a second property, it could be worth selling it. If you only own one home, think about downsizing to something smaller. If you want to find out how much your property is worth, you can find out online at TaylorsEstateAgents.co.uk/forsaleoffice/northampton/248/.
Claim Benefits You Are Entitled To
Make sure you know everything you are entitled to during retirement. You will have probably been paying into some schemes that you might not have even realised. Some payments are taken off our wages. If you have been in full-time employment your whole working life, you could have built up an impressive sum of money without even knowing. One important thing to remember is that your state pension will not be automatically paid to you. You need to sign up to claim it once you have retired. There are also some extra benefits and pensions credits you may be entitled to. Again, you should check this before you actually retire so that you have a good idea of what your retirement income will be.
Take A Second Look At Savings
Are your savings in the best possible bank accounts? How are your other investments looking? Interest rates and many other factors that affect savings and investments will change over time. It is a good idea to keep an eye on yours each year to consider whether they are fine where they are. In some cases, you may benefit from moving them to another account or investment. Your money should be working hard for you, not the other way around. So if one bank account cuts its interest rates, simply move your money into a better performing one.
Work During Retirement
You are not legally obliged to quit working once you hit retirement age. Working through your retirement is one of the best ways to increase your income and make sure you have a healthy cash flow. Working part time is a popular choice among many pensioners. They still have a good income but also have plenty of time to relax and enjoy their retirement. One excellent possibility is to turn your hobby into a job during retirement. If you enjoy baking, why not think about selling cakes? This way, you can make the most of retirement while also enjoying your hobbies and favourite pastimes.
So, as you can see, the main key to a healthy cash flow during retirement is to start planning your finances while you are still working. If you are sensible with your money while you are employed, you should have nothing to worry about during retirement. Just continue to be sensible and wise with your savings and investments!
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.