I’m not really sure when I feel better, when I make or dollar or when I save a dollar. I guess I feel good either way, and since both options can be positive financially, I’m happy with either.
I’m sure that for many current and eventual retirees, retirement means a time of spending money rather than making it or saving it. However, being able to combine all three could make for a substantially more secure retirement.
Earning income in retirement
Earning income in retirement doesn’t have to be like it was in pre-retirement life. In fact, the process could even be kind of fun if done in the right way. Retirement might offer up the opportunity to try new money-making opportunities like starting a business. According to MarketWatch.com, “One in 10 people who work for someone else now said they plan to start their own business when they retire, according to the survey of about 1,500 adults aged 45 to 74.”
But for those who don’t want to become a retirement entrepreneur or risk their retirement finances trying to do so, there may be other income-earning opportunities. A hobby like sewing, painting, or woodworking, could provide extra money through online sales or attending arts and crafts shows. Going to garage sales on the weekend could help save or even make money through “flipping” various finds. Though such work might not equate to a full-time income, it could at least help to supplement other income sources.
Knowing when and where to save
Saving is more than just about one-time cost cuts or sticking every extra cent in the bank. Good saving is often more about knowing when to cut and where, since sometimes cutting back too much can diminish not only quality of life but actually hurt other aspects of saving.
For example, in an effort to save a few dollars by turning the heat down so low at night that the water pipes freeze and burst, resulting in a $500 plumbing bill, isn’t a good way to save. However, going through your budget and determining where costs could be cut for a variety of expenses (even if you don’t have to cut them immediately) can have you ready if or when the time calls for it. Then you can prioritize based upon the importance of the expense (i.e. food vs. entertainment) as well as the overall effects of the cost-cutting efforts. For example, you might be able to cut the same amount from the food budget as the cable bill, but you can survive without the cable bill, not without food.
Finding the right retirement mix
Maybe the most important aspect of combining the saving and making of money in retirement, is finding the right mix of the two. Making a lot of money in retirement might not be as helpful as it sounds if you’re spending more than you make. And low spending could be good, but if you’re not earning enough from your retirement income streams, there may be nowhere else to cut costs, still leaving you over budget, even when that budget is cut to the bare minimum.
Tracking can be the key to finding the proper retirement balance between earning and saving money. By tracking income and expenses, not only can you learn what you spend and where, but you can look for ways to reduce costs if and when needed. Such a tracking system doesn’t have to be fancy (even just jotting such costs/earnings down on a sheet of paper may work); the important thing is that you track finances over time (a multi-month or even multi-year period), providing a better understanding of both long and short-term fluctuations which can lead to a greater knowledge of things like lifestyle inflation, investment performance, and net worth.
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The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.