Cutting Expenses for Retirement? Here’s the No. 1 Thing To Get Rid Of First
Retirement brings numerous financial changes — including an end to expenses you regularly paid while working. For example, you no longer need to pay for a daily commute into the office when you are retired. You can also get rid of ancillary expenses, such as professional attire and grooming, lunches out and pet care.
Deciding which expense to cut first in retirement largely depends on your personal financial situation. For many retirees, the decision is easy — you should get rid of a second car if you have one.
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A second car might have been a necessity in previous years, when you and your spouse were juggling commutes. But most retired couples can get by with a single car since you don’t have to drive to work anymore. Cutting out a car payment — along with the taxes, fees, insurance, fuel and maintenance that go along with it — can help bolster your finances in a big way.
An analysis from AAA found that as of 2023, the average the cost of owning and operating a new vehicle was $12,182 a year, or $1,015 a month. That was well up from the previous year’s average of $10,728 a year, or $894 a month.
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As Mutual of Omaha Mortgage noted in a blog, actual expenses can vary based on factors such as the type of car and its maintenance costs. But even if you spend half as much as average on a second car, you still might dish out around $450 a month on it — money that could help cover essential expenses such as housing, utilities, groceries and healthcare.
As a bonus, the money you get from selling your second car can go toward paying down debt or adding to your nest egg.
If you don’t have a second car (or any car), here are some other expenses you can cut in retirement:
Dining out: This is essentially a luxury, and you can save big by getting rid of it in retirement. If you don’t want to cook yourself, you can still get prepared meals at your local supermarket that cost a lot less than restaurant meals.
Impulse purchases: These might include an impromptu road trip, new electronics or a kitchen appliance you think you can’t live without — even though you have for decades. Retirement is the time when you need to rein in these kinds of purchases.
Peak travel costs: When you were working, you probably had to fit travel into weekends, summer vacations or holidays — the most expensive times. Now that you have a more flexible schedule, you can save a lot of money on hotels, air fare and car rentals by traveling on weekdays and during off-peak seasons.
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This article originally appeared on GOBankingRates.com: Cutting Expenses for Retirement? Here’s the No. 1 Thing To Get Rid Of First