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Budgeting for Seniors

Budgeting Tips for Seniors

While everyone should have a budget, it’s especially important for seniors since many live on fixed incomes. Since a lot of seniors are no longer in the workforce, they live off of their savings in addition to any pension plans or retirement benefits they may receive.

Unfortunately, there are many instances of seniors running into financial trouble and ending up in debt. To avoid such problems, it’s important to stick to a budget. Here are some tips for how seniors can create budgets that work for them as well as tips that make it easier to stick to a budget.

Figure Out Your Income

When you’re creating a budget, it’s important to know how much money you have available each month. Many seniors get their income from a variety of sources, including government benefits, work pensions, and their own savings. Since you’ll be collecting income from several sources, it might take a bit of effort to figure out the exact amount. Sit down and determine how much you can expect to receive in an average month and use this amount when creating your budget.

Try to Avoid Debt

It’s a good idea to avoid using credit cards or taking on other types of new debt in your retirement. Since you’re living on a fixed income, it can be quite difficult to pay down debt when you’re no longer working full time. Create a budget that allows you to live on cash whenever possible, so you don’t have to borrow money or use credit to get by.

If you currently have debt, it’s important to make a plan to pay it off. The longer you carry debt, the more interest you’ll be charged, and the more difficult it will be to pay down.

Consider your Lifestyle

If you’re approaching retirement or already retired, your lifestyle will likely be different from the way you lived while you were working. Once you know how much money you have available each month, you’ll need to think about the kind of lifestyle you want to live.

Someone who wants to travel and see the world in their retirement will have a much different budget than a person who plans on spending their days gardening and visiting friends nearby, for example. Think of what you can afford and what you would like to do. Then work to determine if you can afford your lifestyle on your current budget. If you can’t, you’ll need to adjust your plans to meet your budget.

Think About Using One Car – or None

One way that many seniors save money is by getting rid of one car in the household. Automobiles are expensive, even if they’re paid off. Insurance, repairs, licensing fees, and other charges certainly add up. If you’re in a couple and one or both of you is retired, then you may not need two cars any longer. Getting rid of one can save you a lot of money.

Depending on where you live, you may be able to get by without any car at all, but this will depend on your circumstances and your lifestyle.

Plan for Health Care Expenses

As you get older, your health care expenses will likely increase. While health care likely isn’t a monthly expense, it’s certainly something that will come up periodically and you won’t want to be caught off guard when it does. This means you’ll need to include health care savings in your budget so you able to deal with sudden health care expenses.

Consider Downsizing

Many seniors consider moving out of their large homes and into smaller properties once they’ve retired. If you own a larger home and your children have all moved out, it could make sense to consider downsizing. A larger home is almost always more costly than a smaller one, even if you’ve already paid off the mortgage. Larger homes tend to have higher operating costs (heating, electricity, etc.) as well as higher maintenance costs. By downsizing to a smaller home, you could potentially save money every month.

Of course, before you decide to downsize, you’ll need to look at the numbers. Don’t just look at the monthly housing costs either. If you move to a smaller home, but it’s one that is farther away from your friends and family, you might end up spending more money travelling to visit your loved ones. If this happens, you likely won’t save very much money after all and you could add a lot of inconvenience to your life.

Review your housing situation and see what works for you, then make a decision based on the numbers.