Saturday, September 11, 2010

Retirement Planning – Fine-tuning the Budget

An essential step in retirement planning is to prepare a realistic budget. I’ve been tracking my expenditures for years using a spreadsheet I created myself. Its original purpose was to help me at tax time, so I didn’t obsess about where to log items that weren’t deductible. Now that I’m inching toward retirement, I need to figure out where I can cut back. That requires thinking more carefully about how I categorize everything I spend.

Let’s take for example how I account for wine. I currently log it under entertainment. After all, it has no nutritional value. Entertainment happens to be a category where I expect to cut back. Although I share much of the wine with friends or dinner guests, sometimes I drink alone. That begs the question: Should the wine I drink by myself get logged under “personal?” Don’t get that “I understand, dear” look on your face. A glass or two gives me inspiration for my writing, which will be my profession in retirement. Come to think of it, does that mean I can claim it as a business expense?

What about cat food? Currently, I log that under groceries; it’s all on one receipt so that makes it easier. I suppose it really belongs under “cat care/vets.” What about the food I give to the neighbors’ cats that beg at our door? Doesn’t it properly belong in “gifts?” (That’s another category where I plan to cut back.) If one of the cats turns out to be a stray, can his food be claimed as “charity?”

The personal category is another one that bears scrutiny. Much of what goes in there is hair coloring and haircuts, both of which are now on a five-week schedule. If I switch to a six-week schedule, I’ll reduce that expense by about 17%. Even after we’ve retired to Vermont, I plan to keep seeing Jason here in Providence. When you’ve spent years finding and training a hairdresser, you don’t give him up easily. That means I’ll be driving from the Burlington area back to RI every time I need a cut. Shouldn’t I post the gas for that trip under “personal?” This flies in the face of my plans to reduce that category. I have an idea! If I bring my husband with me so he can check on his store while I’m getting trimmed, I can deduct the trips as a business expense.

When I was in product management at Colgate Palmolive, we had an expression that was popular at budget time: “Figures don’t lie; liars figure.” The fact is, I can configure my plan anyway I want. That won’t guarantee that the numbers will hold up. I had no idea budgeting for retirement could be so stressful. I think I’ll go open a bottle of wine, and since I’m doing it to deal with the stress, I’ll log this one under “medical.”

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