Should you save or splurge?

Retirement is a time for freedom, relaxation, and enjoying the fruits of decades of hard work. 

However, many older Australians find themselves juggling two major financial priorities: enjoying their retirement while ensuring their savings last throughout their lifetime. 

For those fortunate enough to retire with savings, striking the right balance between saving and spending can be challenging, especially with the uncertainty of future healthcare costs, living expenses, and the increasing need for aged care. 

However, there are strategies that can help you balance your finances as you grow older, incorporating a variety of savings and budgeting techniques to help ensure long-term financial security while you’re still enjoying your life. 

Retirement shouldn’t be about constant penny-pinching. After years of working, you deserve to treat yourself to the things you’ve been looking forward to. 

However, there are smart ways to splurge without jeopardising your financial future: 

• Travel is one of the top aspirations for retirees, whether it’s ticking off bucket-list destinations or visiting friends and family. Planning your trips during off-peak times, taking advantage of senior discounts, and booking in advance are great ways to splurge on travel while keeping an eye on your budget. 

• Retirement is the perfect time to dedicate more energy to hobbies and activities that bring joy, be it golfing, gardening, or learning a new craft. Allocating a reasonable portion of your budget for hobbies can enhance your quality of life without significantly impacting your savings. 

• Many older Australians enjoy being able to financially assist their children or grandchildren. This could be helping with school fees, giving money toward a home deposit, or funding a special family event. It’s important to establish a limit on how much you’re willing to contribute, ensuring your own financial well-being is prioritised. 

While enjoying your retirement is important, saving for future and unforeseen expenses is critical. As you age, your financial needs may shift, particularly when it comes to healthcare, home modifications, or the possibility of aged care. Here are a few areas to focus on saving: 

• Medical expenses tend to rise as we age, and even with Medicare and private health insurance, there can be significant out-of-pocket costs for prescriptions, treatments, and surgeries. Establishing a healthcare savings fund helps prepare for these potential costs. 

• As you age, maintaining or modifying your home for safety and comfort becomes more important. Whether it’s repairing an aging roof, installing handrails, or modifying a bathroom for accessibility, setting aside savings for home improvements is essential for long-term well-being. 

• Aged care services, including in-home care or transitioning to a retirement or nursing facility, can be costly. Creating a savings buffer for future aged care needs ensures you have the financial flexibility to choose the care services that best suit your needs.

Finding the right balance between spending and saving starts with effective budgeting. The first step to effective budgeting is to understand where your money is going. By tracking your spending for a few months, you’ll get a clear picture of your expenses. This makes it easier to see areas where you might be able to cut back without sacrificing the things that matter most. 

Once you have a clear understanding of your spending habits, create a realistic monthly budget that accounts for both necessary expenses (housing, utilities, groceries) and discretionary spending (hobbies, travel, dining out). Stick to this budget to avoid overspending in any given month. 

It’s important to have an emergency fund for unexpected expenses, like medical costs or urgent home repairs. Aim to have at least three to six months’ worth of living expenses saved in an easily accessible account for emergencies. 

Just because you’re retired doesn’t mean you should stop setting financial goals. Whether it’s saving for a dream holiday, a family event, or future healthcare needs, having specific financial goals will give you purpose in your saving efforts and help keep your spending in check. 

This article and any links provided are for general information only and should not be taken as constituting professional advice. National Seniors is not a financial advisor. You should consider seeking independent legal, financial, taxation or other advice to check how any information provided relates to your unique circumstances.