The word budget means different things to different people - so your budget may be all you need. Here is what I did and I feel confident the process will work for you. I tracked actual income and expenditures in quicken for several years. (While I don't see a reason to count pocket change every night, if you are putting more than 0.5% of expenditures into the "Unknown Stuff" - you are not going to know. Once you have this, you can project with no life style changes your living expenses. If you have work clothes (like nurses uniforms) you won't need those. If you wear suits, you won't need them as much, so in addition to lower clothing, dry-cleaning will end. We live in a place where retirees have lower property taxes. But if you will be traveling more, guess something like gasoline might go up. Once you retire, the funds you have been saving for retirement will drop from your spending.That in my view current living expense is the most important number -- what will you need to keep the same standard of living. If you are short of funds, you need to get serious and work toward retirement. Pay off debt. Maybe you have to downsize your house. Maybe you need to move from a high cost local to some place with lower costs. But to address your question - yes you have to pay taxes and if you don't you will be in trouble with the tax collector. Do not forget healthcare costs. Medicare part B, which everybody pays starting at $104.90 per month in 2013. Most people need to have either a MediGap policy to cover the remaining deductibles and co-psys. (These co-payments are actually 20% of the total medical costs.) With big ticket items like a heart bypass costing well over $50,000 - 20% of the whole cost is not trivial. Another medical cost is Medicare Part-D. That is drugs. You do not have to sign up, but for every month you do not signup your future premiums, should you signup will increase by 1%. So for example if you delay just over 4 years - when everybody else is paying X per month for your Part-D plan, you will pay 1.5X. A healthy 65 year old may not have much in drugs. But in the last 5 years of life, most people have several drugs and not the cheap ones. Finally if there is a serious hole in your financial plans, the best solution is to keep on working - maybe you don't have the same job, maybe you earn a lot less - but you are earning something. GordonAtlanta
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