The 5 Years Before You Retire: Retirement Planning When You Need It the Most | Chapter 2: Saving and Budgeting for the Next Five Years: Maximizing Your Savings

While not explicitly stated, it seems to be an assumption of Birken that 5 years out from retirement you don’t have enough saved (from calculations in chapter 1). While this won’t be the case for everyone, putting into practice the recommendations from this chapter will improve anyone’s retirement income.

Continuing from the example above, if you have $600,000 and you need to get to $1,000,000, there are things you can control (rather than simply hoping the markets cooperate over the next five years). In a word: Spend less, and save more. Easy said.

I’ll risk scaring you with the B-word. Budgeting. Birken says, “All any budgeting does is track two things: where your money comes from and where it goes.” To that end, Birken offers a few helpful worksheets to accomplish just that. Worksheets that will help

• Tracking income

• Tracking expenses

• Needs and wants analysis

• Reworking your expenses

For those that would prefer to do the work themselves by hand, these are great. For those of you who would also like to check your work, or otherwise would like something else to do the leg work, Birken offers recommended apps/websites/software. Unfortunately, her top recommendation, Mint, is no longer available. Since writing this book, Monarch has become a top player in this space, and is something the Giammalva household uses personally. Link up your accounts, and it will automatically track everything for you. It will need some help from time when it doesn’t recognize a transaction, but otherwise you sit back, and can check in as frequently as you’d like to compare income to expenses.

Once you have an awareness of what you’re spending i.e. where your money is going, you can decide if those amounts and proportions are what’s most important to you. Contrary to popular belief, “A budget is not there to tell you what you cannot have—instead, it is a road map you create to direct your path to the things you desire.” You might be spending lots of money on things that aren’t important to you, and very little on things that are (like being able to retire comfortably).

Once you have (more) money to save, Birken recommends doing so in this order

• Get the maximum 401k contribution match

• Eliminate consumer debt (credit cards, auto loans, etc.)

• Max out Roth IRA

• Max out retirement plan (401k, etc.)

Here’s a helpful takeaway

Next week, we’ll take a look at what income in retirement actually looks like once you’ve done the hard work of diligently saving (by spending less than you earn).

Let us know

• Have you ever kept a budget? Have you ever used a tool online to help?

• What budget item do you fear is out of touch with your values/desires?

Until next time, happy reading!