Your retirement plan may look perfect and work well until you make a big mistake. After your retirement, you should be careful about making budgeting mistakes because, in the long term, it can prove to be big and may spoil your dream of living a financially independent life. So, here are 3 budgeting mistakes that you must try to avoid after your retirement.

Ignoring Inflation’s Impact On Your Budgeting

After retirement, you need to be careful of inflation’s impact on your spending capacity. Inflation consistently depreciates the value of money that you have accumulated in your life and holding it as a retirement corpus. So, in the long term, if your retirement corpus is not able to beat the inflation rate, you may end up falling short of meeting your spending needs. Inflation means a rise in the cost of products and services, so if you don’t consider this in advance, your retirement corpus may fall short of meeting your retirement expenses in the long term. For example, you may not be able to pay medical expenses, electricity bills, etc. So, when making a budget for your retirement, make sure that you consider inflation risk and take steps to mitigate it.

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Relying On Loans To Meet Budget Spending

Your budget should be planned in such a way that you can meet your expenses using your retirement corpus. Borrowing can be a good tool to meet a temporary financial shortfall but you must not depend on it completely. Even if you have to borrow to meet your budget deficit, you must plan it to avoid borrowing more than what you can repay.

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Underestimating Contingency Fund

A contingency fund is a corpus that can help you overcome a financial emergency. Your retirement corpus is required to meet your retirement goals and you can’t risk exhausting it when there is a financial emergency. So, when making a budget, you shouldn’t ignore the contingency fund. Consider the funds available in your hand to meet the expenses after deducting the money required for the contingency fund. Using your regular retirement corpus to meet financial emergencies can cause you to fall short of your financial plans.

Post-retirement budgeting should be reviewed regularly to adjust to changes in your spending needs and to change in the inflation rate. Avoiding budgeting mistakes can help you use your retirement corpus more efficiently and achieve your retirement goals on time.

The author is an independent financial journalist.