Retirement offers the freedom to spend your time and money as you wish, whether that’s traveling the world or enjoying extra rounds of golf. However, reassessing your spending habits is essential to keep your retirement stress-free and avoid overspending. This is precisely what Patrick H. did when he retired several years ago.
Patrick and his wife rely primarily on Social Security and discovered that many expenses were unnecessary. “We didn’t have much retirement savings, so we had to think hard about what mattered most,” Patrick said. “We focused on what gave us the most satisfaction. If an expense no longer held value, we eliminated it.”
Here are six costly expenses boomers should avoid:
1. Expensive Vehicles
The average new car payment in the United States is $735. For a two-car household, this could mean spending over $1,400 a month on vehicles, not including gas, maintenance, or insurance. Consider downsizing one car or buying a reliable vehicle with cash to eliminate car payments. This frees up your monthly budget for other activities.
“After I retired, I realized I wasn’t driving as much,” Patrick added. “My wife and I discussed whether we could manage with just one car. I had an older truck that was paid off, but we were paying a car payment each month for my wife’s car. We decided to sell her car, eliminating the car payment.”
2. Extra Insurance Policies
While it’s important to have protection, some insurance policies may be unnecessary. For example, if your children are grown and financially independent, do you still need a large life insurance policy? If you’ve decided not to drive anymore, you might be able to drop your car insurance altogether. Consult 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 necessary policies.
“Both my wife and I had term life insurance policies, but after we retired, we let the policies expire,” Patrick said. “We had paid off our mortgage, and our kids were grown. We didn’t see the need to continue paying for life insurance.”
3. Gym Memberships
Gym memberships can cost up to $100 per month. While it might seem like a good idea to sign up for a gym membership with extra free time, it can be a waste of money if you don’t attend consistently. If you already have a membership, ensure you’re getting the best price by comparing rates, asking for senior discounts, and confirming you can use the facilities whenever you want.
“Both my wife and I had a membership at our local fitness center, but it cost us more than $100 combined each month,” Patrick said. “My wife used her membership often, especially in the winter, but I went weeks without going. We decided to cancel my membership, but she kept hers. This saved us a good amount of money each month.”
4. Unnecessary Subscriptions
It’s a good idea to check your subscriptions and see if you use them. You might sign up for a free trial and forget to cancel, turning it into a paid subscription. Check your bank account for monthly recurring charges and review each subscription to decide what to keep or cancel. Alternatively, you can use an online service like Rocket Money to find and cancel unnecessary subscriptions on your behalf.
“Periodically, my wife and I review our budget,” 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 over the past six months.”
5. College Loans
While it might seem like a great idea to co-sign your grandkid’s loans, it could leave you responsible for a large amount of money if the loan isn’t paid off or your grandkid decides not to finish school. It can also impact on your credit score and make it harder to qualify for additional loans in the future. Instead, consider giving cash gifts to help with college expenses without taking on debt yourself.
“When we were younger, we set up 529 accounts to help our kids pay for college,” Patrick added. “By doing this, we helped our kids graduate without debt. However, we have friends who co-signed loans for their kids’ college expenses and now their names are attached to the loans. While their kids make the payments, we didn’t want to be in that situation.”
6. New Dream Home
You may have considered purchasing your dream home 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 done 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. Buying a new retirement home was never really an option.”
While there are many things you may want or need in retirement, it’s important to examine your spending and ensure that it’s truly something you’ll use. If not, don’t hesitate to cut it from your budget and allocate that money elsewhere. Retirement should be a time of enjoyment, not financial stress. Be wise with your spending, and you’ll have a much happier retirement.
Source: Yahoo News
