Washington County Weekend Post

GMTODAY.COM SUNDAY, JANUARY 16, 2022 • WASHINGTON COUNTY POST • 3 Who hasn't tallied up monthly bills or looked at a credit card statement and pondered if they're spending a little too much? The aver- age person also may wonder how their expenditures com- pare to other people around the country and what they need to do to enjoy financial freedom in retirement. According to the U.S. Bureau of Labor Statistics, the average American house- hold spends just about $57,000 each year between necessities and luxuries. Canadians are spending even more than their neigh- bors to the south. Statistics Canada indicates that, in 2016, the average annual expenditure on goods and services per household totaled $62,183. So how are people allo- cating their funds? The results may surprise you and indicate where it's possible to trim some fat and save big bucks. Across North America, housing is the largest line item in people's budgets. Various sources suggest that housing and shelter needs account for anywhere from 30 to 40 percent of most household budgets. By mak- ing housing decisions based on areas with the most effi- cient cost of living, individu- als can save considerably over the long run. The second largest expenditure category is transportation. This accounts for the cost to finance or lease a vehicle and insure it, and it also includes urban dwellers who rely on public transportation or ride-share services to get around. Keeping transporta- tion budgets in check can be great a way to save. Food is the next largest expense. While everyone needs sustenance to stay alive, how that money is allo- cated can make a big differ- ence in saving versus spend- ing. The BLS says that food at home costs around $4,000 annually, while spending on dining out amounts to around $3,100, for a grand total of $7,100 each year. Statistics Canada notes that Canadian households spent an average of $8,784 in 2016 on food and that 26 percent of that spending was on dining out. Cutting back on dining out can be a great way to save money, as can becoming a more sale-conscious gro- cery shopper. Healthcare, utilities and entertainment are the next most costly expenditures, respectively. But each of those items are considerably less expensive than the top three. Therefore, making changes to where one lives, how one gets around and how one eats can certainly add up to considerable sav- ings. Where people spend most Work is a major compo- nent of daily life, so much so that Andrew Naber, an industrial and organiza- tional psychologist and an associate behavioral scien- tist at RAND Corp., deter- mined that the average per- son spends 90,000 hours at work over the course of his or her lifetime. According to a 2014 Gallup poll, the average American retires at age 62, but roughly 64 percent of professionals bid farewell to the work- place between ages 55 and 65. Retirees must make a number of adjustments once they call it a career. No such adjustment is as significant as the financial one. Most people find their post-retirement income is considerably less than when they were working full-time. That is why finan- cial planners often recom- mend saving and investing enough during working years to be able to replace 80 percent of preretire- ment income. Certain expenses get lower after retirement, but some will rise. Here's a look at what to expect when the bills come due during retire- ment. • Food costs: Food costs may go down in retirement because shopping and preparing meals for one or two people is much less costly than feeding a fami- ly of four or more. Howev- er, dining out may increase as you have more free time to visit local eateries. • Automotive costs: According to data from the U.S. Department of Trans- portation, the average com- muter spends 25.8 minutes behind the wheel twice a day, and the average driver puts in 13,474 miles behind the wheel each year — with people between the ages of 35 and 54 clocking close to 15,000 miles. Less time spent in the car means fewer gasoline fill-ups and longer durations between oil changes and other ser- vices. In addition, based on the Internal Revenue Ser- vice reimbursement rate of 58 cents per mile, a typical commute of 20 to 30 miles a day costs $11 to $16 a day or $55 to $80 a week. In a year, you could easily be spend- ing $2,000 to $4,000 a year commuting if you live with- in 15 miles of your job. Without commuting, that cash stays in your pocket. • Taxes: Many people can expect to be done pay- ing federal income taxes when they are retired and no longer earning an income. If the majority of retirement savings were in Roth IRA accounts, contri- butions are available for withdrawal tax- and penal- ty-free at any age. • Housing: Your mort- gage may be paid off before or soon after retirement. That eliminates the single largest expense in many people's budgets. If your home will not be paid off, it's possible to downsize to reduce monthly payments. • Travel: While many other expenses can go down, travel is one expense that can shoot up during retirement. But many peo- ple are happy to bear this cost. With more time for travel, retirees may allocate more funds toward vaca- tions and other great escapes. • Health care: Seniors often see their health care needs and costs go up after retirement. It's important to understand what is cov- ered by health plans, and it's equally important to set money aside for unforeseen medical expenses. Many costs of living decrease after retirement. However, it is wise to take in the whole picture to understand how to budget for retirement. How expenses can change during retirement

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