A recent article was headlined “Nearly 40% of Workers Report Dipping Into Their Retirement Savings Early”.

Clearly, most of those people are spending too much money.  After forty years or more of working, earning money, and paying bills, they still have not learned to budget – to balance their income, savings, and expenses.

In that order:  understand your income, after taxes.  Religiously put money into savings – and preferably, putting most into purchasing stocks which are good long-term investments.  Make sure that constant building of your savings will pay for a down payment on a house, your kids’ college, and your retirement.  

Then, with what remains, budget to pay the mortgage or rent, make payments on a car loan, buy food, pay the electric, water, gas for the heater, and any other “fixed costs”.  Fixed costs are the ones that are fairly constant from month to month.

Finally, figure out the “variable costs”, those that change from month to month:  buying clothing, going to a restaurant once or twice a month, going to the movies (in the rare event when there is a show worth seeing), etc.  Variable costs are often items which you can delay purchasing or purchase less frequently, if necessary.  

Buying a car should be considered a variable cost.  Even though making car payments is a fixed cost, choosing to buy a less-expensive car is necessary to keep your costs down – both fixed and variable.

Keep your costs affordable – even if you do not end up getting the raise you expect or hope for. 

Paying for purchases by credit card where possible is fine – but make it an iron-clad rule to pay off the credit card(s) in full every month.  If money is tight, paying interest on a credit card is a very expensive, budget-busting mistake.

Learning to budget and holding to a budget should begin as soon as you earn your first dollar – even if it is money you earned in an allowance from your parents, or money given to you as a present by your grandparents.  Budgeting is necessary throughout your life, without exception – and making excuses to ignore your budget is a bad choice, with bad consequences.

Budgeting includes paying off the mortgage and car loans before you retire.  After those are paid off, work for at least two more years.  With no large monthly payments, that will be two years of big bonus payments into your savings.  

By the time you retire, a life of budgeting will really pay off.  Your savings will allow you to live just as comfortably throughout your retirement years as you did during your working years.  If you have invested your savings by purchasing stocks, the knowledge gained from three or four decades of investing experience will let you continue to make good investments for the rest of your life.  

As a successful investor, you will have investments totaling more than a million dollars.  

With more than a million dollars invested, when you retire you will be able to continue to watch your investments grow even as you take out money to live on – sort of “living off the interest”.  Your biggest “problem” should be what to do in your will:  to give some of that to your children, and how much, and whether to give some to non-profit causes, and how much to give to each.

Doesn’t that sound a lot better than failing to budget properly?

Be able to enjoy your retirement.

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