the first thing is your budget. Budgets aren't just for when you are working. you'll also need one for managing your expenses for the upcoming period. You can think about this as a precursor for retirement.
My budget is simple. I've got a house, a car, and a family. I've got a mortgage, I need to maintain things, and we need to eat. Also, we need health insurance, auto insurance, and a few fun things here and there. So my budget needs to handle that.
Mortgage and insurance are the biggest ticket items. Mortgage is around $2800, and insurance around $1400 a month. auto insurance is around $50 (paid every 6 months), gas and car maintenance runs a few hundred, and amusements will run a bit here and there.
Now I could save on the insurance, but I like not having to worry about that sort of things. I could go through the marketplace and get insurance for around 800, but with a high deductable. I extended my coverage under COBRA, which let me continue my existing insurance at the same rate. It is interesting to see the cost of health insurance through your employment - most places that supply insurance usually have pretty decent programs, since a sick employee isn't adding any value.
The mortgage will not change. I've got a pretty good rate, so I don't really want to refinance. Most of the insurance offers are currently above that rate, so refinancing will actually have me paying more over the long run.
auto insurance, gas, maintenance, and the like will not change, either. I can drive a bit less (and have done so) get cheaper insurance, and skimp on maintenance. But here in Texas there isn't any such thing as walkable shopping, so a car is essential. Gas is pretty much a constant - a mile driven will consume x amount of gas. Biking to a few places helps to cut that a bit. Getting a more effficient car would lower that, but at the expense of a car payment. Since both of our cars are paid off that would be an extra $300 that we can delay on. Maintenance could also be delayed, but usually the longer it is put off, usually the more it will be. Insurance could also be downgraded, but stuff happens. Even a minor fender bender will cost thousands, and having made a claim for this just last month, I'll keep that right where it is.
Food is an easy one. Restaurants are easy, seductive, fast, not too nutricious, and don't seem to cost too much. but added up over time the cost of food when you eat out all the time adds up. By preparing more meals at home I can cut that expense down quite a bit, and make them more nutritious. I shop around, get good ingredients, and stock up a few things when they go on sale. Most of the meals I prepare are simple - pasta, vegetables, some sort of protein, and dessert every once in a while. I usually cook a bit extra, since I can reheat stuff for another meal with little added cost. While we don't eat every meal at home, even a few a week cuts the expenses by a good percentage. I eat most lunches at home, rather than eating fast food.
Entertainment is a tougher one - We don't spend massive amounts of time going to amusement parks or at the movies, but we don't cut them out completely. We still go to the movies, usually a smaller Cinemark down the road from us that has a cheap matinee. We don't go to Six Flags, but are planning a trip to Florida in June.
Again, it comes down to planning. I went through this exercise before I decided to take my break, I have been saving money in a couple of locations, such as the stock purchage plan and some external investments, and factored in what I would need on a monthly basis. I planned periodically to draw off money from selling stock. Keeping these draws spread out keeps the expenses down, and makes me think more of where the money is going.
Thinking about this in terms of retirement, there will be only a few differences. The mortgage will be gone, and the health insurance will be offset a bit by medicare/medicaid. there will be some income in terms of pensions, but the draws from a 401K and other sources will still remain about the same. I'll figure out some of that later on, exactly. Beffoore that time I'll think about whether we'll want to move because of taxes. I'll always have federal taxes, but different states have different state income taxes, property taxes, and the like. Texas has no state taxes, but has one of the higher property taxes. Louisiana has one of the lowest, but has a higher income tax. essentiall every state has advantages and disadvantages, not all of them monetary. access to shopping, entertainment, health care, and other amenities are also important. Personally I like some space around me, but I also like close by shopping and high speed network access. In twenty years these priorities may change, though.
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