CURRENT BUDGET

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Of all the issues impacting retirement, the amount of money you project to spend during retirement has a significantly greater impact on the amount of funds needed than the projected inflation rate, return on investment or anything else. Further, using a rule of thumb- say 60% to 80% of current budget- is invariably a simplistic method designed for very superficial analysis and should never be used for any long term planning. If you are off "just a bit", the amount of funds you believe you will need may not remotely match the funds you will spend during retirement. You don't want to find out at 70 years of age that you are going to run out of money in the next five years because you didn't do the number properly when you were 50. It's too late at that point to make adequate adjustments.

The following is the most detailed personal budget currently in use. (Admittedly, it does not include investment properties and businesses, but those are defined separately.) It may take quite a bit of time to get all the figures (remember some of your payments may be made only annually and you therefore must track down payments made many months previously).

Now this is how you do retirement budgeting. Look at each one of the line items. See how they might change when you retired. One example is clothes purchases. You obviously are not going to be buying lots of new clothes- certainly business suits- and you should reduce the amount accordingly. Maybe you are going to retire to Florida where you can forget snow removal- by the same token your utilities will be higher in the summer due to air conditioning. The point being is that you simply don't take 65% or 75% of current costs because there are two many factors impacting the decision. So take your time before putting just "any" number in the retirement column. Add up the numbers when through and you should have a pretty good budget on which a good plan may be developed. I also know that the younger you are- certainly age 45 and under- the more difficult to determine valid retirement numbers. But you have to start someplace. For those 45+, the need to focus on retirement numbers is mandatory and you have no choice but to complete carefully.

Expense Item (annualized)
.................................... Current Expenditure Upon Retirement .................................... Current Expenditure Upon Retirement
FOOD ......................... COMPUTER ..........................
Groceries New Computer
Alcohol/Tobacco Upgrades
Restaurants Software

Personal

Repairs
Work Related Supplies
Appliances and Cookware/Kitchen On line Services
Miscellaneous
ENTERTAINMENT AND RECREATION
Vacations
Air
Car rental
Lodging
Gas
Access fees
tickets
Insurance

Travel GIFTS AND CONTRIBUTIONS
Recreation Equipment and Activities- Biking, Kayaking, Fishing, Hunting, Hiking Religious and Charities
Sporting Events Christmas gifts
Movies/Theater Personal
Parties hosted in home
Fitness Club CHILD/ DEPENDENT CARE
Cable TV Daycare
CD's/Tapes Cleaning
Country Club Medical care
Other Hobbies Babysitting
TRANSPORTATION Respite care
Car payments Sports (Registration fees, uniforms, travel)
Auto maintenance In home Assistance
Auto insurance PERSONAL CARE
Parking Hair care
Parking Tickets Toiletries
Parking permits Personal care appliances
Public transportation Pocket money allowances
Carpool costs Massages
Taxes and fees
Tolls
Gas EDUCATION
Oil Education/training expenses
Registration Newspapers
Car Wash Books/Book clubs
CLOTHING Magazines
Mending/repair Professional dues
Dry cleaning/laundry Personal tuition
New purchases/personal Personal room and board
New purchases/work Child tuition and room and board (current)
Child tuition and room and board (future)
Miscellaneous
OBLIGATIONS SAVINGS
Income Tax Personal Savings
Medicare Retirement savings
Social Security Company stock/options
Consulting fees 401(k)
Tax preparation TSA's 403(b)/501)c)3
Other tax IRA's
Life insurance Keogh
Term SEP
Whole life SIMPLE
Universal life Investments
Variable Individual securities
Disability insurance Mutual Funds
Umbrella insurance Real estate
Credit card fees Annuities
Credit card payments Fixed
Interest Variable
Principal        Equity Indexed
Finance fee
Cash advance fee
Alimony/support PETS
Child support Veterinarian
Child care Food
Child allowances Board and care
Business expenses Insurance
Attorney fees
Other debt
Union Dues
Storage fees
Postage
HOME
Home mortgage/rent MEDICAL

Interest

Hospital
Principal Physician

Home Equity Line

Dentist
Maintenance Prescriptions/Vitamins
Furnishings Health Insurance
Gas Medigap insurance
Oil Long term care insurance
Electricity Dental insurance
Telephone Vision insurance
Home
Mobile
Property Insurance
Fire Insurance
Earthquake Insurance Subtotal All Yearly expenses
Flood Insurance Miscellaneous 5% to 10% extra
Umbrella/liability insurance TOTAL CURRENT ANNUAL EXPENSES *********
Contents/personal property insurance TOTAL ESTIMATED RETIREMENT ANNUAL EXPENSES *********

Property Tax
Condominium/ Association fees
Garbage
Water/including bottled water
Sewer
Well Maintenance
Mowing service
Landscaping service
Septic Tank Cleaning
Snow Removal
Maid service/cleaning

This is one of the most comprehensive budgets I have seen to date and a lot of people are adverse to completing all the areas. But I designed it this way because I found that the short form, simplistic budgets missed key areas. And if you miss a bunch of those, the whole budget may be useless. For example, look at one of the last items- PETS. I have rarely seen a line item in any budget for this, but vast numbers of people have and love their pets- and they have also been shown to extend life. But the costs for care can be expensive and obviously need to be recognized.

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