Gary Lucas Financial Advice | No. 1 Certified Financial Planner in Byron Bay

Financial Insights



Living Expenses as a Retirement Planning Start Point


Planning for your retirement doesn’t need to be overly complex.

Whilst it isn’t easy there are some important steps you can take to help make the retirement planning process simpler.

The first of these is to understand your expenses

It’s helpful if you approach this as an annual “expense plan,” not as a “budget”

As a fan of Fawlty Towers, I am reminded of Basil’s infamous “don’t mention the war” comment. I feel that the same applies to the word “budget”. Most people dislike the word and its connotations. “Budget” is too often seen as a restrictive process used to police your spending and impede on your preferred lifestyle. As such it is usually avoided. This is unfortunate because by simply changing how you view the process; you can turn it into a very beneficial part of your lifestyle and your retirement planning. 

An expense plan can identify the costs needed to meet your priorities for the way you want to live and to afford the activities you like. A “budget” can be viewed as an expense plan where you start the calculations with consideration of how much money you can realistically spend, and then make plans for how to live your life within that defined parameter.

I am not encouraging you to be frivolous and that your spending should be unlimited, but to start by being truly aware of what your comfortable lifestyle vision is, and to then work from a realistic financial perspective. It is a much more enjoyable experience in both the short and long term.

However, there can be difficulty with reaching your goals through this process because it is difficult to fine-tune and calculate everything accurately. To overcome this, you need be as certain as you can in the maximum number of areas possible, and then add in room for error just in case.

How do you plan your expenses for retirement?

Your annual expense plan (note that I didn’t say budget!) does not need to be complex. There is special budget planning software available, but a simple excel document can be the perfect tool to spreadsheet your estimates and calculations. 

The first column can name each expense item, such as groceries, telephone, and so on. Then each subsequent column can list months of the year, with the final column for the dollar totals corresponding to the expense listed on each row. Once you have entered some figures, the excel programme can add up each row for you, just by using a simple formula or the ‘sum’ button, so that it’s easy to overview the totals of your annual expenses. You can do the same for monthly totals at the bottom of each monthly column.

Once you have the model established, you can just update it monthly or quarterly and you have a great tool at your fingertips to get excellent estimates to target your income and expenses.

If you don’t know how to use excel or don’t have access to the software, I recommend that you ask a good friend or someone in your family (the younger generation usually have a good idea). Or if you prefer, email me with where you are at in getting setup and I will work out the best approach to help you get established with this process. 

It is worth the effort

The end result is to ascertain the minimum figure you need to meet your regular living costs and to live the life you want to. This shouldn’t include larger irregular items, such as overseas holidays, car upgrades, helping the kids, or house improvements. Those expenses are part of the next step in the retirement planning process.

This daily expenses planning process takes a little time and effort to setup, but once it’s underway it forms an important foundation for the rest of your retirement planning. The next step is fun, inspiring, and at times a little confronting, so getting the foundation sin place makes the whole journey much more enjoyable and much simpler. From here on in, you will find that all of this starts to flow much more freely.