The first step for consideration when creating a retirement budget, is knowing what you are spending right now. Knowledge is power, and tracking your income and expenditures is critical if you are going to retire early. This can be a sobering, even tedious exercise, but necessary to take the next step. The first step is determining what you will use to track your expenses. You can do this with apps, or spreadsheets or by keeping a paper and pencil ledger. Whichever you choose, it is a good idea to think about the categories that you spend in. Sometimes, it is easier to track all of your expenses for a month and then decide what your categories are going to be. Once you've tracked your expenses, and categorized them, it is time to do a careful review and consider if your spending matches what you value. From this point you can consider areas you are spending too much, or too little and adjust. Now you are ready to move on to considering a retired budget.

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There are many unexpected expenses that you might face in retirement, which is why it's important to have a contingency plan in place. Here are some common examples:

1. Health care expenses: As you age, your healthcare needs may increase, which can result in higher healthcare expenses. Even with Medicare coverage, you may need to pay for copays, deductibles, and other out-of-pocket expenses.

2. Home repairs and maintenance: Your home will likely require ongoing maintenance and repairs, which can be expensive. Major repairs, such as a new roof or HVAC system, can be particularly costly.

3. Long-term care: If you or your spouse require long-term care, such as assisted living or nursing home care, the costs can be significant. Long-term care insurance can help cover these costs, but it's important to plan ahead for this expense.

4. Unexpected travel expenses: While travel may be a planned expense in retirement, unexpected travel expenses can arise. For example, you may need to travel to care for a sick family member, attend a funeral, or deal with a natural disaster.

5. Tax expenses: Your tax situation may change in retirement, and you may face unexpected tax bills. For example, if you withdraw money from a traditional IRA or 401(k), you'll need to pay income taxes on the withdrawals.

6. Inflation: Inflation can erode the purchasing power of your retirement savings over time, making it more difficult to cover your expenses.

It's important to plan for these unexpected expenses by building a buffer into your retirement budget and considering options like long-term care insurance or home warranty plans.