This month we are fortunate to have a guest post by Roni David with excellent suggestions on managing our money as we age. It is very timely because just this week I was speaking to a friend who lost her husband a few months ago. He had always handled their finances, and she told me she had no idea how to set up a budget so she could comfortably be assured that her money would last the rest of her life.
I worked with my friend that afternoon to help her set up a budget and suggested she speak with a money manager to get more details about her IRA and other finances. The next day she told me she had already taken some actions to get her finances in order. This woman is 80 years old, which proves that you are never too old to learn something new, including how to budget.
Below is the article by Roni Davis. Check it out and see if her post can help you do a better job of managing your own money and, hopefully, avoiding a late-in-life bankruptcy. It is never too late!
How to Budget for Seniors
Why Should Seniors Budget?
Budgeting is important for anyone, but it can be especially important in retirement. Without a budget, you could lose track of your spending and exhaust a lot of what you have saved. In some cases, seniors can even go into debt because they have not budgeted their money properly. Here are the main reasons why budgeting is important for seniors.
Limited Income
Some people have the luxury of saving a lot throughout their life so that when they retire they have plenty to live off of. However, for some people, this is not an option and, in retirement, they have a small amount of money to work with. Many seniors live primarily on Social Security, which doesn’t pay very generously, forcing them to live on a very limited income.
This can be a huge transition from a lifestyle where you receive a paycheck each week and, if seniors do not budget properly, they may find themselves spending more than they have.
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Expenses Can Change
As with anyone, expenses change over time. Your housing payment may go up, or your bills can go down. The difference for seniors, however, is that the consequences of expenses changing for the worst can be much more serious. Most seniors do not have the ability to increase their income by changing jobs or picking up extra shifts. Budgeting is crucial to avoid this issue, so that if expenses do change there will be a sufficient amount saved.
Seniors Cannot Afford Debt
When you fall into debt early in life, it isn’t great, but you also have the means to pull yourself out of it. Additionally, when you are in debt in your 20s or 30s, you have years ahead of you to pay it off. On the other hand, seniors do not have this ability, and depending on the extent of their debt, they can take it to the end of their life. While you may be wondering why it would matter if they are not going to be made to pay it off, this can seriously affect any inheritance they want to leave behind. You certainly do not want to leave your grandchildren finances which are on the brink of bankruptcy.
How to Budget as a Senior
If you are approaching retirement, or know a loved one who could use some budgeting tips, here are some easy ways to start:
Make A Monthly Expenses Worksheet
The first step to any budgeting plan is to figure out how much you spend each month. This is important because it tells you how much you are going to absolutely need for each month. This is also a good time to examine whether any of your spending needs to be cut back. For example, if you are paying to live in a senior living community, this could take up a large portion of your budget. In this case, you could look for a different, less expensive place to live.
Take a Look at Yearly Expenses
Not all of your expenses will be the same each month. Some of your utilities will cost more at certain times of the year, especially during the summer and winter months. During these times you will probably run your heat and air conditioning more often, which is going to drive up the cost. When you are creating your basic budget, you need to factor in these changes, especially if there is a large difference during certain months.
Choose Your Insurance Well
Insurance premiums can be paid on installment plans, whether it is monthly, quarterly, or semi-annually. Therefore, depending on the cash flow that you have, spacing your payments out in a certain way might be better for you. This would give you the time you need to make sure you save enough over the course of several months to pay for it at each installment.
Paying for your insurance annually does require you to spend a lot of money at once, but generally this is the cheaper way to go. This includes premiums for car insurance, health insurance, life insurance, and homeowners insurance. Just make sure you are putting aside enough money monthly to make the payments when they come due.
When you create your budget you should include more than just your necessary expenses like housing, food, insurance, and more. You should also account for the things that you purchase as luxuries, including shopping for yourself and others, travel, and personal care. This is a good area to cut back, if you find that your spending is exceeding a reasonable amount each month.
About the Author:
Roni Davis is a writer, blogger, and legal assistant operating out of the greater Philadelphia area.
Whatever you decide to do to supplement your retirement income, it is important to realize that Social Security rarely provides all the income you will need in retirement. You need to plan well in advance how you will support yourself.
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