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Whatever the amount you currently have in your nest egg, retirement will almost certainly result in significant changes in your life. 

Your income sources and costs will likely change. As you transition from saving for retirement to utilising your hard-earned retirement funds, your financial priorities may also shift.

Recognising the Importance of Cash Flow Management

Personal cash flow management usually involves calculating how much money comes in vs. how much money goes out. 

It’s so important for everyone to have a solid understanding of what their financial situation looks like.When reaching an understanding of what your financial situation is, you may want to consider devoting any extra cash to other significant financial goals you may have. 

Naturally, the higher your income and lower your costs, the greater your surplus, which implies you may reach your goals sooner. 

This is not a retirement-specific idea. It is usually helpful at all times of life, but it is commonly essential when you no longer receive a regular working income.

Here are Four Strategies To Consider in Managing Your Cash Flow During Retirement:

1. Start With a Budget

Knowing how much you’d like to spend each week or month and what your expenses may be, can be a great place to start in determining your retirement income needs. 

Certain expenses that you currently have will continue into retirement, while others can be significantly reduced or eliminated altogether. It is also crucial to distinguish between costs considered requirements of life and those that are included in your dream retirement lifestyle.

According to the 2021 ASFA Retirement Standard, couples aged approximately 65 enjoying a pleasant retirement need to spend $63,352 per year, while singles need to spend $44,818. If you determine your spending will be above or below average, it’s important to look at setting your budget accordingly.

2. Consider Creating An Investment Portfolio in Retirement  

At any moment during your retirement, your income streams may generate more money than you need to spend. If this is the case, you should consider how to continue investing that extra cash flow to fulfil both your short- and long-term income and growth needs. 

In general, the larger your comfort level with risk (due to investment horizon and risk tolerance), the greater the amount of risk (and possible return) you can afford to take.

One strategy to explore is to set aside money for various requirements, such as living expenses, short-term objectives, and emergencies. Then you can determine what funds you have leftover to invest. 

If you are planning to leave some of your superannuation invested for maximum growth, read our article on 3 Ways You Can Use Your Super for Retirement to learn more!

3. Have a Clear View of Your Finances

In retirement, the financial management system you devise should provide a complete perspective of your money. 

Accessing concise, up-to-date information on your cash balances, transactions, and assets can help you avoid cash flow shocks.

Putting in place an excellent cash management strategy today may allow you to pay dividends later. It may, for example, make it easier for you to manage your finances as you get older. 

Keep track of the details, such as direct deposits and automatic transfer schedules, so that if you cannot access your account(s), a properly authorised spouse/partner or a third party can make the required modifications.

4. Debt Management

You may not feel the strain of personal debt when you are working. Paying off a credit card, loan, or mortgage when you have a steady paycheck becomes normal. However, if you still have debt in retirement you continue these debts into retirement, paying them out of your super fund may limit your capacity to spend in the future.

If you can reduce your debt before retiring, you have more potential to be in the best position to achieve a consistent cash flow surplus. If you are worried about your financial situation, we urge that you seek expert counsel well before you plan to retire.

Consider taking advantage of strategies that can provide you with a streamlined process to manage your finances and pay off any expenses, now that you’re retired. 

Seeking support from a financial adviser to consider the “what ifs” of future cash management also includes deciding how to spend your financial resources over a retirement that may last 30 years or more.

HH Wealth is a financial advisory service provider, offering support to clients who want to grow and protect their money. 

If you are looking for the best financial advisor in Brisbane to help with your retirement planning, book a complimentary consultation with us today!

CB Wealth Australian Pty Ltd T/As HH Wealth is a Corporate Authorised Representative (No. 1283595) of Axies Pty Ltd ABN 38 136 704 446 AFSL No 339 384. Chris Holme is an Authorised Representative (No. 1004793) of Axies Pty Ltd ABN 38 136 704 446 AFSL No 339384.

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