Budgeting for pension cut-6 Liquid Accounts

As part of my monthly budgeting and expense method I record the amounts in my various accounts and examine the change from the previous month. That helps determine where the money is going and how fast I am using it.

I split the accounts into two major categories. Liquid and tax deferred. I do that because the liquid accounts are the ones I use for cash flow, and the deferred tax accounts are those that I generally leave alone to grow without having to pay tax on them before I withdraw money.

In the liquid accounts I list my bank accounts and investments made with after tax money. I also separate the liquid accounts into those that I use for day to day business, those that I am trying to grow, and those that I consider as accruals.

I generally use one checking account to pay my bills and I have my pension and other income paid directly into that account. I also transfer money from my savings account to that checking account when I need it to pay specific bills. That way I try to keep a close eye on the checking account to understand where my bills are coming from, and how the amounts compare on a month to month basis.

I have various savings accounts that I consider as accrual accounts that I use to build cash which I plan to use for property tax payments, estimated tax payments, vacations, and other large expenses such as a wedding, or a car purchase.

I transfer amounts into those accrual accounts monthly based on the amount I have decided to use for a specific purpose. Hence my property tax account builds up over the year and when it come time to pay that bill I withdraw the money from that account. That way it doesn't seem so onerous as suddenly having to pay the bill and taking the money out of general funds.

Same thing for travel and vacations. Having decided what I will spend in the year I let it build monthly and then when we take a trip I withdraw the money from that account to pay for the travel costs. It doesn't make it any cheaper, it just gives a slight psychological edge, and makes travel that more enjoyable knowing I have already saved up the money to pay for the trip.

I also include my investments in the liquid accounts even though there may be capital gains (or losses). I include CDs, mutual funds, and dividend paying REITs as well as a few stocks. So I keep track of where they stand monthly by checking on line and it helps me keep an eye on change to my total worth. It helps to know that in order to know how long funds will last as current spending rates.

This may seem a lot of work but I find it useful to be aware of how my bank accounts change and it also gives me a chance to manage costs in a way that will allow me to adjust when my pension is reduced. I can plan to save for specific fixed costs like property taxes and I can adjust my outflow by changing my travel budget and other expense budgets to meet the new reduced income level.

It has taken me years to arrive at this budgeting and expense method, and I'm sure that everyone reading this has their own approach. I am writing this to try to help those who haven't set up any system, so that when October comes and pensions are reduced,there is some method that they can use to determine how to adjust to live with that reduced income straeam.