5 Reasons Every Boomer Should Stick to a Budget

senior man being puzzled with...
ShutterstockA well-crafted budget can help you reach your financial goals and fund your retirement activities.

By Kelly Campbell

Americans are notoriously poor savers. According to a 2014 Bankrate survey of about 1,000 U.S. adults, 60 percent of Americans could not afford to pay for most unexpected expenses. If you're in retirement or close to retirement, this could be a big problem. But there is a way boomers can be better prepared: become better at budgeting.

A budget brings your expenses in line with your income. It helps you control your financial future and fund your retirement activities. Fortunately, there are many budgeting tips and tricks to make it easier. For example, in your monthly bank statement, you can see how much came into your account and how much went out. (Hopefully, more came in than went out.) Many of your credit card statements can categorize expenses, so you can easily see what you are spending and where your money is going. You can also sign up for services like Mint.com, which can help you track your financial life online.

%VIRTUAL-WSSCourseInline-857%Knowing what you spend is important. We've developed a process for our clients called the 24-month checkbook drill. With this exercise, we have our clients look at the last two years of checking statements. From that review, they can determine the average amount of money they are spending each month. Knowing this figure can really help you plan for your retirement.

But with all of these tools, few people ever plan their monthly expenses. Many people likely take a guess and are off by thousands of dollars. Making matters worse, people tend to think they will spend less in retirement, when they will probably spend the same amount or even more. If you're a boomer nearing or in retirement, here are five reasons you should be budgeting.

You can determine how much you are spending. Without a budget, how would you know if you are spending too much or living beyond your means? You can't control taxes, inflation or the market. The only thing you can control is your spending. There are lots of things people do not include in their budget, either because they are seasonal or one-off expenses. For example, most people don't budget for gifts. But if they did, they might rethink how much they are spending on that category. With respect to retirement planning, you need to know what is going out the door each year.

You can set aside money to keep and money to give away. While you want to take care of your family, friends and charities, you also need to make sure you have enough money to do the things you want and need to do. People often try to take care of everyone else, but they forget to take care of themselves first. If you have a budget, you will know exactly what you need to live on, and you will know what you can safely afford to give away.

You can create a beneficial habit. Budgeting is a lifestyle. Once you develop these skills, it is easier to budget without even thinking about it. It's important to have discipline and control, and that discipline is strengthened with repetition. The more you do it, the better you will get at doing it. However, the most difficult part is starting. But rest assured, the longer you do it, the easier it will be for you. It's also beneficial is to start a budget alongside a friend. That way, you can help each other and have an accountability partner.

You can manage ever-increasing expenses. In retirement, things keep getting more and more expensive. Some of the items you buy each day will cost more based on the regular inflation rate. But other things, like health care, long-term care and major household repairs can increase at significantly more than 2 to 3 percent a year. Planning and saving are the best ways to prepare for these expenses.

You can save more for unexpected or discretionary expenses. Rainy days, emergencies and vacations are all parts of everyday life. By setting a budget, you can always add a new item to save for. For example, some people start a holiday gift fund in the summer that allows them to put away a small amount each month to pay for the gifts they will buy later. It also keeps them from having to buy those gifts on credit. Or what if you want to take the whole family to Disney? That will not be an inexpensive vacation, so you may need to save well in advance. Putting it in your budget will help it become a reality.

Kelly Campbell, certified financial planner and accredited investment fiduciary, is the founder of Campbell Wealth Management and a registered investment adviser in Alexandria, Virginia. Campbell is also the author of "Fire Your Broker," a controversial look at the broker industry written as an empathetic response to the trials and tribulations that many investors have faced as the stock market cratered and their advisers abandoned their responsibilities to help them weather the storm.