The golden rule for managing personal finances applies to just about everyone, young, old and in between: Spend within your means.
But a key distinction surfaces in planning for how to spend your money in retirement, says New York City-based Certified Financial Planner™ Larry Luxenberg of Lexington Avenue Capital Management. “What's different [in retirement] is your income is fixed, not your spending, and the consequences of overspending are different. If you overspend in retirement, you may need to go back to work or [you will] run out of money.”
The best way to keep from overspending and to maintain control of your financial destiny throughout retirement is to establish a spending plan, says Robert Braglia, a Certified Financial Planner™ who heads American Financial & Tax Strategies in New York City.“A spending plan is vital to provide you with a view of what the future holds and to give you a path to live the best life possible during retirement.”
The process of devising and implementing a spending plan is relatively simple once you understand the steps involved, including: