Creating a Budget for 2011

As a retiree, my wife and I have a set amount of money coming in each month. We are able to enjoy our retirement after years of careful saving, and years of preparing a full budget each year, and sticking to that budget. The monthly income from social security, my pension and investments is enough for a nice comfortable lifestyle, as long as we are careful and always stay within our budget.

We always do a written budget in mid-January, at the same time we go through our receipts and prepare our taxes. We cover all our monthly expenses in the budget and if it's not in the budget it doesn't get paid. We go by categories: mortgage, auto, food, entertainment, insurance, savings and then list individual expenses under each heading. We always fudge the numbers a bit high and try to add in extra amounts to cover any contingencies, so we are never caught short.

Since our income is fixed, we must find ways to stretch our fixed budget to make that income go further. We also want to enjoy our retirement and travel and be able to share our money with our children. To us, making a budget isn't something to restrict our lifestyle; it improves it as it allows us to live better on the same level of income.

The main change in 2011 for us is we have downsized our entire lifestyle. We sold our three bedroom home in Tucson, Arizona and moved into a nice one bedroom apartment in West Hollywood, California. While the rent is comparatively high, we now have none of the responsibilities or expenses of a home. Our utility bills, taxes, maintenance costs, etc are far less or non-existent now.

To further reduce our expenses, we took a serious look at our utilities. Our first cut was cable. When Time-Warner raised our rates to almost $100 a month, we switched to Netflix and an over the air antenna. This move alone saved us about $75 a month. We looked at our mobile phone plans. Our contracts with Verizon had expired years ago. We called and were able to get unlimited minute plans for $20 less than we had been paying before for 1000 minutes a month. We stopped all unnecessary magazine and newspaper subscriptions and were shocked when we realized those were costing us about $50 a month and we can still read all of them online or at our local library. Little changes like this easily added up to save us more than $500 a month.

Another expense we cut under this year's budget was our auto spending. In Tucson we had two cars, with the gas, insurance and maintenance expenses that go along with them. We realized we just didn't need them. We donated one car to a local charity and received a nice tax deduction. We used the other car during the move from Tucson to Los Angeles, then sold the car locally after arriving. The car had low mileage, and we got a nice price for it, along with the elimination of all the related expenses. While everyone can't give up their cars, it may make sense to downsize to a smaller, more economical vehicle or review and consider public transportation options for getting to work.

A destination can't be reached without a route and financial success can't be achieved without a budget. First attempts may miss items and underestimate others, but over time this key financial tool will prove beneficial.

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