Budgeting in Crazy Times

One of the really annoying things about trying to retire is that you have to figure out how much money you need to live on. Some people have a very good grasp on their monthly outlay, and for others this is a tougher exercise than organizing the sock drawer.


With the challenges and disruptions this year form our resident pandemic, pretty much everyone has been forced to adjust their budget and crunch the numbers harder than usual. Aaron and I were no exception.


I typically have a good feel for my monthly spending, but this year has definitely knocked me for a loop. I’ve had to constantly remind myself that we’re not dining out while going through sticker shock every week at the grocery store. And I may have justified one too many golf related purchases with the money saved from canceling travel plans. I think the tradeoffs have been about equal, but the truth of that statement is pending further review.


Aaron was dealing with a double curveball this year and chimed in with his budgeting journey over the past few months:


“In preparation for the arrival of our baby girl Raina last October, my wife and I spent much of the last few years getting our finances where we wanted them to be, doing things like cutting cable, refinancing our home and switching cell phone providers.  Going into 2020, we focused on building a budget that would allow us to enjoy ourselves, while continuing to prepare for our future. Well, in September I can say that most of that went out the window. Fortunately, due to our preparation for Raina, extra money we’ve spent to stay sane has been mostly balanced out between our cost cutting measures and canceled plans.”


Don’t get us wrong, we’re not complaining. We realize that this has been an unbelievably difficult year for many people. The need to make changes just really got us thinking about budgeting.


As we were mulling over what it has been like to adjust to this budget bomb year, we realized that this is actually pretty similar to preparing for retirement. You’ll probably spend money on different things than you used to and getting comfortable with these new spending habits can take some time.  


So, how can you go about budgeting for a completely new situation?


Here are a few ideas:


First, have a grip on your current cash flows. Aaron and I both found this very helpful when trying to figure out our COVID life spending even though most of what we thought we would spend money on didn’t pan out. You can’t change a plan if you don’t have one.   


Second, be creative with your cash flows. Most people are used to getting paid once or twice a month but the constant coming and going of money can be difficult to keep track of. Getting paid less frequently, like once a quarter, can really help you see your withdrawal rate from your bank account. This can be a great thing to try early in retirement if you’re still not feeling comfortable with what you’re spending.


Third, test it out. At the end of the day, budgeting is very personal and there are many ways to do it. Some people manage all their money from the same account and others will have different accounts for different purposes. It is definitely worth the time to try budgeting a few different ways and figure out what makes you feel most comfortable with your money.


Getting a grip on your budgeting style will put you in a better position to get on top of whatever changes life throws your way.