I would feel lost without my budget. For the last forty-five years or so I have made it a point to plan my expenses for the coming year, matching needs and wants with income. Each purchase is recorded by category. Then, once a month I look at a report that compares my budget with reality. Sometime in December I do the planning all over again for the new year, based on actual expenses and projections for the new year.
I strongly believe this reliance on a budget and the careful tracking of expenses are part of what allowed Betty and me to retire as early as we did. Not knowing where our money went and hoping we didn't spend too much just wasn't in our genes. Now that we have inherited a portion of my parents' estate I really don't have to budget as religiously as in the past. But, I do.
2015 was a year that made a bit of a mockery of the budget I developed a year ago. Our unexpected decision to move to a new home in May and all that entails with decorating and settling in, the reworking of our vacation plans, my heart attack in August, and a reordering of our priorities because we now live less than 5 minutes away from our grandkids forced major changes. Money was shifted around as certain categories were cut and others expanded. Even so, the expenses were only 4% higher than what had been planned for.
I certainly expect 2016 to be a little more stable, though I thought the same thing for this year. Life is all about learning to adjust. A satisfying journey through retirement takes constant course corrections. A budget and careful tracking of expenses helps make that happen.
For 2016 I am expecting my income to remain unchanged. As a retiree with an IRA and investments to draw on, income is really the wrong word. Better would be to say the amount of money I will withdraw, coupled with Social Security, will be the same.
One major change will be the withdrawal rate from my IRA: 0%. With tax free estate money now available, I do not plan on touching my IRA for years. Except for the minimum amount I must take out each year after I am 70.5 years old, there is a good possibility that the money in that account will (hopefully) compound and grow for the next few decades, untouched. It would be nice to have it available for our kids when the time comes.
I anticipate 2016 will be the year we finally cut back to one car. About to turn 13 years old, the car Betty uses for running errands is on borrowed time. We have decided to not put any more money into its repair and upkeep, except oil changes. It is driven less than 3,000 miles a year but is thisclose to having something important fail. Spending $20,000 on a replacement seems silly at this point in our life.
With our family so close to each other, gatherings at our house for meals, games, movie watching, and general merriment (!) have increased dramatically. So have our food and beverage expenses. The budget will contain a new category: Family meals and togetherness. Betty and I want to feel free to host as many get-togethers as we can without fretting over the costs, be it food, drink, or even lawn and board games that add to the fun.
Our fixed medical expenses will decrease in 2016. This year Betty was forced to buy health insurance on the open market and paid a lot. Next year, she will be able to use the Federal marketplace to get a much better rate. With Medicare and supplemental polices for me increasing only minimally, I have been able to trim that portion of our budget. Of course, no one can predict illness or injury, so doctor visits, pills, and even hospital stays could punch a huge hole in our planning - even with insurance. But, if that happens we will deal with it.
Baily, our dog, is getting to the age (now 4) that we need to plan for an increase in her health care. Cleaning human teeth is not cheap. Cleaning a dog's teeth is worse. Her haircuts are almost three times more expensive than mine. The only kennel she will tolerate if we are gone on a trip without her costs over $80 a day. Her share of the budget will increase.
One of the best decisions we made when moving to our new home was to finally hire a house cleaner. Betty and I had been handling the chores since our first days together. Now, we felt our time and energy should be spent on other things, so we started using a service, twice a month, right after the move. It has made a tremendous difference to us, especially with family here so often. I think we would give up something else completely before we stopped that "luxury."
Budget amounts for gifts, clothing, food and household expenses, RV costs, yard service, furnishings, charity, cell phones, and utilities all show slight adjustments, but everything balances out in the end with some judicious shifting between categories. I will take a final look at our 2015 expenses next week, and finalize the new budget on New Year's Day.
2016: Bring it on!