10 Essential Budgeting Tips for Early Retirement

Following these 10 budgeting recommendations can put you in a better position to save enough money each month to meet your savings goal. Let’s start by having a clear picture of where your money is currently going.

Fortunately, there are several user-friendly (and largely free) tools that automate spending tracking. Here are our top selections for the best budgeting apps of 2021, which not only automatically track costs in many categories but also assist you in meeting your retirement savings objectives.

• Mint (free for iOS and Android)
• Albert (free for iOS and Android; premium version begins at $4 per month)
• YNAB: You Need a Budget ($11.99/month after a 34-day free trial; accessible on iOS, Android, and PC)
• Goodbudget (free for iOS and Android; premium version begins at $7 per month)
• Marcus (previously Clarity Money) (free for iOS and Android)

10. Give Each Dollar a ‘Job’

This budgeting advice is based on the old “envelope method,” which divides all of your monthly income into separate envelopes designated “mortgage,” “groceries,” “student loans,” “entertainment,” and so on. This manner, each dollar of revenue is assigned a defined “job.” If your grocery budget begins to run short, you must be inventive to make it last until the next month.

Although few of us pay with cash today, applications like YNAB operate on the same concept. First, budget for all required and recurrent costs, then set aside as much money as possible for retirement savings. The more you save each month, the sooner you’ll attain your goal.

9. Determine What is a ‘Necessary Expense’

Remember, your budget is personal, therefore your spending categories do not have to match anybody else’s definition of required costs. Tanja Hester, the author of Work Optional: Retire Early the Non-Penny-Pinching Way, advocates avoid worrying about what others consider necessary.

“Look at it for yourself,” Hester adds. “If you don’t need new clothes often, maybe because you’re not going into the office every day, then cut down on your clothing spending.”

8. Set It and Forget It

Automation is an effective technique for staying to a budget. Use online banking or a budgeting program to make automated, scheduled withdrawals for all of your recurrent costs, including your monthly savings.

“I’m a big fan of automating things as much as possible,” Hester explains. “If you want to save $500 per month, set up an automatic transfer.” If you never see the money, you won’t miss it.”

7. Keep What You Have

In both Work Optional and her new book, Wallet Activism, Hester encourages readers to reject the consumption society that pushes us to upgrade continuously. Maintaining your existing assets, particularly in transportation and housing, might result in significant savings.

“Transportation and housing are the two biggest expenses in most people’s lives,” Hester adds. “Staying in the same home and keeping a car for 20 years can result in massive savings.”

6. Build Up Your Emergency Fund

Unexpected costs might jeopardize your money. Hester highlights the significance of having an emergency fund to meet unexpected expenditures such as medical bills or significant repairs.

“An emergency fund should cover at least six months of basic living expenses,” Hester adds. Once in place, you may make substantial savings.

5. Raise Your Savings, Not Your Lifestyle

When you earn a raise, increase the amount automatically sent to your savings and investments rather than increasing your spending.

“Getting a raise is a good time to see if you can save more or pay off more debt,” Hester adds.

4. Surround Yourself With Savers

Hester and her husband discovered that spending time with people who shared their spending habits helped them keep to their budget. Consider mingling with others who are likewise concerned about saving.\

3. Travel Smarter

Hester enjoys traveling, but advocates finding methods to make it more affordable. Think beyond pricey hotels and consider what you genuinely want from the experience.

“There are always ways to make travel cheaper, like staying at 1-star hotels or traveling during off-peak seasons,” Hester explains.

2. Fun Money Is Critical

Budgeting $0 for entertainment is unsustainable. To avoid financial fatigue, make sure to set aside dollars for pleasurable activities.

“Always make sure you’re building in some amount of fun money,” Hester tells me.

1. Do Not Be Afraid to Switch Budget Gears

If your budget isn’t working, don’t be hesitant to try other ways or applications. The only decent budget is one that you can stay with.

“If you feel constantly questioning whether it’s worth the sacrifice, it’s a sign something needs to change,” Hester advises. “Maybe it’s time to increase your fun money budget or take more time off.”

What’s Next?

Sticking to a budget entails eliminating superfluous expenses and discovering new methods to make money. Retiring early is a luxury and one that most of us dream for we just need to do the right steps towards a happy retirement life.

Sophia Nguyen

Associate Writer • Environmental Technology and Sustainability Writer

Sophia writes articles on innovations in green technology, including ca energy, sustainable materials, and explores how technology can address environmental challenges and promote sustainability.