12 Essential Steps for Financial Peace of Mind

By: Alyssa Miller | Published: Feb 21, 2024

You want your money to work for you when you decide to retire. Shifting your spending habits is one way to ensure you don’t run out of money during retirement. While your investments will cover your living expenses, other hacks can extend your dollar.

You don’t need to change your entire life philosophy around personal finances, but these tips can help you shift your spending habits.

Navigating Financial Priorities

“Throughout your life, spending in a budget-conscious manner is important,” Thomas Brock, CFA, CPA, and expert contributor for Annuity.org, tells GOBankingRates. “It’s especially critical during your later years, as income streams tend to decline and healthcare costs typically rise.”

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Knowing this will help you realistically budget as you age and your income changes. Your health won’t be perfect forever and you can’t avoid health issues like you did when you were younger.

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Create a Realistic Budget

Planning for these changes requires a realistic budget that accounts for various factors such as evolving income streams, potential health-related expenses, and lifestyle adjustments.

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This includes acknowledging changes in income, anticipating health-related expenses, addressing uncomfortable costs associated with aging, and making necessary adjustments to your lifestyle. By proactively planning and budgeting for these factors, you can better prepare for a financially secure and comfortable retirement.

Take Advantage of Social Security Benefits

Some government plans are available to help you as you get older. “To make the most of your savings, prioritize your spending needs and be strategic about how you draw down your funds,” Brock said.

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Brock continued: “This means optimizing the age at which you take your Social Security benefit, complying with the IRS’ required minimum distribution rules for traditional retirement vehicles, and maintaining a diversified investment portfolio that enables you to comfortably raise money in different economic environments.

Find Your Financial Balance

You worked hard for your money, so enjoy it! But there is a balance between fun and ensuring you don’t outlive your funds. Finding that balance might seem like a struggle as inflation figures rise and the cost of living always seems to be on the rise.

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“There’s no doubt you need to prioritize your spending on what matters most to you,” Jeff Rose, CFP and founder of GoodFinancialCents, told GOBankingRates. “Maybe that’s travel, hobbies, or spending time with grandkids. Put your money where your joy is, but don’t bury your head in the sand to avoid overspending. It’s about finding that sweet spot where you can enjoy what you love without compromising your financial security.”

Integrating Enjoyment into Retirement Financial Planning

Setting aside funds for activities that bring joy in retirement is an essential component of comprehensive financial planning.

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By prioritizing enjoyment alongside financial security, maintaining flexibility, and seeking professional guidance, you can create a retirement plan that allows you to pursue your passions and live a fulfilling life in your golden years.

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Finding Different Streams of Revenue

While you’re planning your realistic budget that allows you some flexibility and fun in your life, look at the different streams of income sources. Some of these sources might include pensions, Social Security, and any investment income.

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Check-in and stay updated on your income streams to make sure you are making enough to cover your expenses and verify that you’re keeping up with the growing inflation.

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Comparing Expenses to Income

When you are looking at how you spend money, compare it to how much you are bringing in. Making comparisons between your expenses and your income is a fundamental aspect of financial management and budgeting.

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Doing this provides insights into your financial health, aligns your spending with your priorities, and identifies areas for improvement.

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Adapting Your Investment Strategy to Changing Spending Habits

As your spending habits change, your investing style is sure to change as well. “Consider adopting a more conservative approach to your investments to protect your capital, focusing on income-generating assets that offer stability,” Kovar said.

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“Regularly review your withdrawal rates to make sure they’re sustainable; many experts recommend the 4 percent rule as a guideline, but adjust based on your situation and market conditions.”

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Be Flexible As You Review Your Budget

As you move through your later years, consider how much you will be spending now that you are not aggressively saving for the future. “If you have a solid retirement plan in place, do not live out your golden years in an overly austere manner,” Brock said. “You have worked hard to build your nest egg.”

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Kovar shared further insights on making this transition, saying, “It’s crucial to have a budget that accounts for your essential expenses, healthcare costs, and some wiggle room for leisure and travel because you’ve earned it.”

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Check In With Your Financial Advisor

Life isn’t always going to be perfect. Check-in with your financial advisor to see how your spending habits need to change, adapt, and pivot as the economy goes through changes we cannot control.

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“Life can throw curveballs, and your financial plan may need adjustments,” Kovar said. “Regular check-ins with a financial advisor can help you navigate these golden years with confidence and peace of mind.”

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Are You Ready For Retirement? 

Planning for financial security in your later years involves implementing strategies tailored to your individual goals, circumstances, and risk tolerance. Working with a financial advisor can provide invaluable guidance and expertise in navigating the complexities of retirement planning.

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By implementing tailored strategies to manage income, expenses, investments, and risks, you can enjoy your golden years without the stress of financial uncertainty, knowing that your finances are well-positioned to support your desired lifestyle and retirement goals.

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