A Budget versus Budgeting

In Articles, Articles: Kansas City Office, Articles: Salt Lake City Office by Scott Dougan

A Budget versus Budgeting: Why the Difference Matters for Retirement

Life is full of goals and resolutions that come and go – some stick, most don’t. But money goals? They tend to linger. That’s because the need for money, and the challenges that come with managing it, never really go away. And when retirement starts appearing on the horizon, those financial questions grow louder: Am I really ready for the day my paycheck stops? Can I live on what I’ve saved and what Social Security provides?

One of the most crucial and often overlooked parts of preparing for retirement is estimating your expenses. Knowing how much your lifestyle costs helps you determine whether your retirement nest egg will last. But when we raise this topic with future retirees, we often hear the same response: “We’ve always just lived on what we made, so we never really had a budget.”

Here’s the good news: That’s perfectly okay.

You may think I’m going to say you should’ve been tracking every penny and creating spreadsheets for decades, but I’m not. Why? Because while you may not have practiced budgeting in the traditional sense, you still had a budget. It was simply whatever income you earned. The difference is key: Having a budget means you’ve got a finite amount of money to work with. Budgeting, on the other hand, is the process of planning how to use that money.

Preparing for Retirement: From Budget to Budgeting

As you get closer to retirement, your financial life starts to shift. Your paychecks stop coming from work and start coming from your investments and savings. That’s why it’s essential to understand what it currently costs to live your life, so you can determine how much income you’ll need to replace.

So how do you figure out what you’re actually spending if you’ve never actively ‘budgeted’?

There are two reliable ways to get a clear picture:

Option 1: Track and Total Your Expenses
Pull together at least three months’ worth of:

  • Bank statements
  • Credit card transactions
  • Utility and insurance bills
  • Any other recurring or irregular expenses

This three-month window helps capture both regular bills and occasional expenses like quarterly premiums or annual subscriptions. Put it all in one place and total it up. That’s your monthly cost of living.

Option 2: Back Into the Numbers
Start with your total gross (pre-tax) income, then subtract:

  • Retirement contributions (which stop once you retire)
  • Taxes paid
  • Regular savings or debt payments

What’s left is likely a strong estimate of your actual spending. This method helps you avoid missing any hidden or irregular expenses you might overlook with the first method.

Adjust and Refine

Once you know what you’re spending, you can make thoughtful adjustments. Maybe you’ll eliminate work-related costs like commuting or clothing. Or maybe you want to increase spending in retirement on things like travel, hobbies, or fitness. The key is knowing your true lifestyle cost so you can budget realistically for the retirement you envision.

Don’t Forget Healthcare

A word of caution: health insurance is often the biggest wildcard in a retiree’s budget. If you’re retiring before Medicare eligibility at age 65, premiums can be substantial. Be sure to plan for those costs carefully, including deductibles, out-of-pocket expenses, and long-term care considerations.

Peace of Mind Through Planning

At the end of the day, it’s not about whether you’ve been budgeting all your life. What matters is that you take the time now to understand your expenses – and that you use that insight to shape a reliable, informed retirement income strategy. Having a budget is one thing. But doing the budgeting now? That’s the real key to retiring with confidence and peace of mind.