One rule of thumb in retirement planning is to plan on replacing at least 70% of your income in retirement.And while there's an abundance of literature out there about how you can build up the sort of nest eggto make that possible, building up your savings is only half the battle. Spending 70% of what you once did before retiring can be just as important -- and challenging. After all, you've got a whole lot of time to find new ways to spend money that you didn't before.
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However, one great way to tackle the issue is by taking the 70% challenge. Look at what you're currently spending, and try to go one month where you cut out about a third of that. Then, extend the challenge to two, three or four months, while stashing away extra money in your retirement savings accounts. You might even discover that hitting that 70% mark is easy enough that you'll want to keep it going to reap the benefits.
So, here's a quick look at some tips for how you can hit your goal in the 70% challenge so you can get a better sense of what retirement can hold for you on a reduced budget.
Make a Budget
This might seem obvious, but you really can't expect to cut spending in a way that will stick unless you're actually keeping track of what money is going where. You might discover that 30 percent of your monthly spending is already going toward savings, in which case the 70% challenge isn't going to be much of a challenge for you. The point is that you won't know what you're capable of until you've gotten a clear, comprehensive look at your spending.
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Get a Budgeting App
Of course, if you're dreading sitting down with a legal pad and doing hours of math, there's a simple solution: Get a budgeting app. There's a variety of apps to choose from that you can link to your bank accounts and credit cards so you're really capturing every dollar. Many apps -- such Personal Capital -- will do most of the work for you, so it should streamline the entire process a great deal. The app also won't hold anything back or overlook categories, which means it's likely to give you a more accurate picture of your spending.
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Cook More
It's not exactly revolutionary to observe that it's cheaper to eat in than dine out, but it's worth noting that you might be underestimating just how much. Wellio -- a platform designed to help people plan and prepare meals at home-- found that it costs almost five times more to order delivery than to cook.Not to mention more know-how in the kitchen can mean even more savings as you cook things from scratch. The cost of canned beans, for instance, is more than double that of dried beans you prepare yourself.
Reduce Your Living Space
While this is something you would want to keep theoretical until your actual retirement, you can use real estate websites like Zillow to get a sense of how your budget might change if you scaled back your living space. Moving from your family home to a condo or apartment could end up reducing your living expenses and help you avoid a lot of home repairs.
Compare Costs of Living
Sperling's Best Places provides cost-of-living comparisons from across the country. If you have plans to move somewhere else to enjoy your retirement, you might want to look at what that would mean for your costs.
If you think living in Manhattan would make retirement fun, you're not necessarily wrong, but you need to be realistic about what you can afford. Likewise, if you dream of spending your golden years in a rocking chair in Mississippi, it's possible that you won't need to make any major changes to afford your dream.
Weatherize Your Home
The U.S. Department of Energy recommends doing an energy audit of your home to identify where you're potentially losing money every month to issues you caneasilyrepair yourself. Not only will taking care of energy waste now help you save for retirement, but going through the process also means you'll be ready to ensure you're keeping energy costs low in retirement.
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Cut the Cord
There are more ways to access entertainment without a cable subscription these days than ever before, so carving that big monthly bill out of your expenses can go a long way toward getting to 70%. You can experiment with what it's like to spend a month only watching TV or movies on one or two cheaper subscription services to see if it's worthwhile, and if you find your life isn't affected enough to be bothered, don't wait for retirement to lose your cable bill.
Start Gardening
One way to reduce that grocery bill while simultaneously eating better and enjoying a new hobby is to start a garden and grow your own vegetables, especially if you live in warmer climates with longer growing seasons. There's clearly some costs involved, but a good garden and a decent freezer can mean stocking your cupboards for most of the year with vegetables from your yard. Give it a shot and see what you can save for a full month once your crops start coming in.
And, who knows? Maybe you just need that initial push to transform your backyard into an elaborate Victorian-style British garden.
Stop Going to Coffee Shops
You've probably heard this piece of advice before because it's painfully true. The cost savings of brewing coffee at home -- even for the plain drip coffee -- are a lot. If you've resisted this particular one for a while, at least give it a shot for a month or two to really see how much you end up saving. No matter how much you love that latte, you might find that you just love money more.
Buy in Bulk
This tip comes with the caveat that you definitely won't save money by buying more than you need. No matter what sort of discount you're getting, if you buy more perishable food than you consume -- leading to rotting food in your fridge -- it wasn't a good choice. However, getting a deal on nonperishables that you use a lot -- things like toilet paper or garbage bags -- can go a long way toward reducing costs, so check out your local Costco to see what your options are.
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Reduce Energy Use
While weatherizing your home is the first step toward reducing energy costs, the next step is trying to figure out where you can cut back on your power bill by just using less. Start looking around for household energy drains that you can do without, fiddle with that thermostat to see if you can stand it being hotter in the summer and colder in the winter, or look into turning off the air conditioning or heat when you know no one will be home. You might discover that there's a lot of simple ways to keep your energy use low that won't have a big impact on your quality of life.
Learn To Sew
This might fall into the "easier said than done" category, but mending old clothes instead of buying new ones can be a major plan for saving money. Even basic sewing knowledge can mean squeezing extra years out of each article of clothing. And, if you're really ambitious, you might even be able to learn how to do it all yourself and make your own clothes.
Take Advantage of Credit Card Rewards
There is one massive caveat to credit card rewards: Few things are going to put the 70% challenge way, way out of reach faster than credit card debt. So, if you aren't great at paying the full amount on your bill every month without exception, the last thing you need is a new credit card.
But for those who do use credit cards responsibly by paying them off in full every month, look into what cards offer rewards points that you might actually use or -- better yet --cash back on purchases. As long as you avoid ever paying interest, the right card can help make a dent in your spending while allowing you to buy what you would have anyway.
Clean Your House
If you're spending money on having someone clean your domicile instead of picking up after yourself, try skipping a month and handling it all yourself. Sure, it might not be entirely necessary now, but you'll likely have the time to take on these chores after you're retired, so it's worth preparing yourself for that eventuality now and learning what's involved and how much you can save.
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Kill That Gym Membership
Getting rid of your gym membership doesn't mean you should quit exercising. If your gym is one of the only things keeping you fit, the long-term healthcare costs of not exercising will far outweigh the costs of your gym. However, that doesn't mean there aren't a lot of great ways to exercise without spending a penny. Sure, there's no juice bar at the end of your jog around the block, but you can save some money that will get you a lot closer to that 70% goal.
Live on Less Now To Enjoy Retirement Later
Saving money isn't easy, and you might need to take more than a few cracks at the 70% challenge before you can nail it. However, preparing yourself for living on a budget now can mean avoiding costly mistakes in the early years of your retirement that could put a dent in your nest egg. What's more, focusing on learning cost-saving skills can just as easily help you discover a hobby you love or reveal pricey expenditures that you don't need to wait until retirement to eliminate.
So, don't hesitate to take the 70% challenge. The only major change you'll make issaving money that you can put toward retirement, and you might even have some fun in the process.
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This article originally appeared on GOBankingRates.com: See How You’ll Fare in Retirement by Taking the 70% Challenge
