Over the years, studies have revealed that many Americans do not have enough saved for retirement, and many people expect to work until their death. This is a tragic but common reality for millions of Americans today and tomorrow. 

But does this have to be your reality? Not if you start preparing today, with simple changes that can have a big impact on your retirement livelihood. The first, and arguably most important step: creating a realistic retirement budget that you can work towards.  

We have compiled a guide on the best method to budget your salary for retirement. 

1. Create a List of Your Fixed Monthly Expenses 

As you approach your retirement days, you will have a sense of your current fixed monthly expenses and what they potentially will be when you retire, including costs such as utility payments or smartphone plans. With this knowledge, you can create a list of what you will inevitably spend each month. This gives you an idea of how much money you will need to maintain your life’s basic essentials. 

In doing this exercise, you might realize that you do not need a comprehensive cable package or multiple streaming service subscriptions in your winter years. Paring down these unnecessary expenses may make your retirement budget more attainable than you anticipated. 

2. Calculate Your Payments (Fixed and Variable) 

Do you plan to work in your retirement? How much income are you anticipating? Will you be receiving a workplace pension in addition to a government one? Do you have dividend payments coming? 

Whatever the case, you can calculate your payments ahead of time to approximate your budget. While you are trying to budget your salary today for your retirement tomorrow, it allows you to determine what you can work with once you exit the workforce. 

3. Crunch Your Total Net Worth 

Knowing your total net worth is imperative heading into retirement. Why? You may think that your current salary is sufficient. However, the reality is that it may be short of your retirement goals. Therefore, if your total net worth is insufficient, it might be a good idea to pad your wallet or bank account by trying to earn more, whether it is getting a part-time job or adding more to some dividend-paying stocks and exchange-traded funds (ETFs) that might be on sale right now. 

4. Assess Different Accounts 

How you use your financial accounts might be the easiest trick in the book to ensure a prosperous retirement. You could even make the switch today to add a few more dollars to your budget. Whether an all-in-one checking and investment account, a free checking account with all the bells and whistles, or even a zero-commission trading platform, the finance industry has produced a diverse array of accounts to benefit your wallet.  Explore your options and see how a switch to a smarter account can help your money work hard today, to benefit you in the future as you transition into retirement. 

5. Think About Your Realistic Retirement 

What is your dream retirement? Perhaps it is traveling the world and snapping shots of the Eiffel Tower, the CN Tower, the Pyramids of Giza, and the Leaning Tower of Pisa. While these are great fantasies, they might not be realistic, especially if your retirement savings and investments have failed to keep up with these (perhaps expensive) dreams over the years. 

Therefore, it might be time to start considering a more realistic retirement, allowing your current salary to adapt to the reality of your days outside of professional existence. This might include exploring the natural beauty and sights within your own backyard (instead of halfway around the world), hanging out at coffee shops with your friends, or taking summer road trips. 

Whatever the case may be, embracing the idea of a realistic retirement that aligns more closely with your retirement budget, will help you develop a more manageable financial strategy starting today. 

6. Lower Your Expenses

The Balance offered an incredible piece of advice for anyone who plans to retire: “As a general rule of thumb if you want more fun in retirement, find ways to lower your fixed expenses so you can have more flexible funds available to spend on the interests you most enjoy.” 

Indeed, there are so many ways you can cut back on your fixed expenses, like ditching the cable, curbing your smartphone package, and ending your gym membership which never says much action in the first place! The lower your regular expenses, the higher your savings. And you do not have to wait until you leave the labor market to implement this practice– you can do this right now, allowing more of your salary to go into your savings account. 

Remember, most of what you are doing now is preparing your life for retirement. Small, smart changes in your spending, saving, and investment habits today, will make a big impact tomorrow.

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