The best part of retiring is spending your time and money how you want to. Whether that includes traveling the world or playing a couple extra rounds of golf each month, you have flexibility during this time of your life.
However, reassessing your spending habits is a great idea to keep your retirement stress-free and ensure you’re not overspending. This is exactly what Patrick H. did when he retired several years ago.
He and his wife live mostly on Social Security and they found that many expenses were a waste of money for them to have.
“We didn’t have much retirement savings, so it forced us to really think hard about what meant the most to us,” Patrick said. “We considered what would provide us with the most satisfaction. If a particular expense no longer had much value, we eliminated it.”
Let’s dig a little deeper into some costly mistakes boomers should avoid.
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Expensive Vehicles
The average new car payment in the United States is a whopping $735. If you are a two-car household, you may pay over $1400 a month alone on vehicles — not including gas, maintenance or insurance.
Instead of wasting your hard-earned money on car payments, consider downsizing to a one-car household or buying a safe, reliable car with cash to eliminate car payments. This allows you more freedom in your monthly budget for other activities.
“After I retired, I realized I wasn’t driving nearly as much,” Patrick added. “My wife and I started discussing whether we could make it work with just one car. I had an older truck that was already paid off, but we were paying a car payment each month on my wife’s car. We decided to sell her car, leaving us without a car payment.”
Extra Insurance Policies
It never hurts to have too much protection — investing in good life insurance or disability insurance can be beneficial, depending on your circumstances. However, you may be presented with many insurance options that you may not need.
For example, if your children are grown and financially independent, do you need a large life insurance policy? Or, if you’ve decided that you no longer want to drive, you may be able to drop your car insurance policies altogether.
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Take some time to talk with your financial planner to ensure you’re not paying for insurance you don’t need and that your beneficiaries are up-to-date on the policies you do need.
“Both my wife and I had term life insurance policies, but after we retired, we decided to let the policies expire,” Patrick said. “We had paid off the mortgage on our home and our kids were grown. We didn’t think there was much of a need to continue paying for life insurance at that point.”
Gym Memberships
Gym memberships can cost up to $100 per month, depending on where you go and what classes you take. While it might seem like a good idea to sign up for a gym membership with all your extra free time, it costs you a ton of money if you don’t plan on attending consistently.
If you want to invest in a gym membership or already have one, ensure you’re getting the best price possible by comparing rates, asking for senior discounts and ensuring you can use the facilities whenever.
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“Both my wife and I had a membership at our local fitness center but it was costing us more than $100 combined each month,” Patrick said. “My wife uses her membership a lot, especially in the winter, but I went weeks without going. We decided to cancel my membership, but she kept hers. This helped us save a good amount of money each month.”
Unnecessary Subscriptions
Speaking of memberships, it’s also a good idea to check your current subscriptions and see if you use them. Often, you may sign up for a free trial and not realize that you forgot to cancel, which turns into a paid subscription.
Are you not sure how to find all of your subscriptions? You can start by checking your bank account and seeing monthly recurring charges. Make a list of those subscriptions and go through them individually to see what you want to keep or cancel. Alternatively, you can use an online service, like Rocket Money, to find unnecessary subscriptions and cancel them on your behalf.
“Periodically, my wife and I will sit down and look at our budget to see what needs to be modified,” Patrick said. “We noticed that we had signed up for Peacock to watch Big Ten football games last fall and forgot to cancel after the season ended. That cost us quite a bit of money the past six months.”
College Loans
While it might seem like a great idea to help guarantee your grandkid’s loans, it could leave you on the hook for a large amount of money — particularly if the loan isn’t paid off or your grandkid decides not to finish school. Additionally, it can impact your credit score and make it harder to qualify for any additional loans you may need to get in the future.
If you want to help with college expenses, consider giving cash gifts instead of taking on any debt yourself. This will ensure that there are no long-term financial consequences for yourself while still being able to support your loved ones.
“When we were younger, we set up 529 accounts to help our kids pay their college tuition,” Patrick added. “By doing this we help both our kids graduate without any debt. However, we have friends who co-signed loans to pay for college expenses and now their name is attached to the loan. While their kids make the payments, we didn’t want to be in a situation like this.”
New Dream Home
You may have considered purchasing the home of your dreams during retirement, but it may be time to reevaluate that idea.
“My wife and I have lived in our home for 40 years,” Patrick said. “We’ve gone through a few renovations, but this is the home we love. It’s where we raised our kids. We planned to pay off our mortgage, eliminating housing expenses from our retirement budget. Because of that, buying a new retirement home was never really an option.”
Final Take To GO
While there are many things that you may want or need in retirement, it’s important to examine your spending and ensure that it’s truly something you’ll make good use of. If not, don’t be afraid to cut it out of your budget and use that money for something else.
Retirement should be a time of enjoyment, not financial stress. Be wise with your spending, and you’ll have a much happier retirement.
