For many seniors, the most popular income sources are social security and pensions. Whether you’re still working or have already retired, it helps to understand how to manage your income sources in today’s world where prices and living costs keep rising. If you’re not sure where to start, here are five money-management tips for seniors on a fixed income.
- Seek Help
There’s no doubt that saving is a habit. You need significant discipline and planning to achieve your savings goals. Many people fall short when planning their lives financially. Consult with retirement planning advisors like Prime Wealth Advisors to ensure you have clear and realistic wealth management goals and targets. After, set yourself up with the right tools to make money management easy – a mobile app linked to your bank account or a simple spreadsheet, for example – whichever works best for you.
- Budget Correctly
Planning can help you stay on top of your budget. It helps determine your investments and other fixed expenses. It’s crucial not to leave any expense category unexplored. Don’t forget to factor in the fun. You have no idea of how an unplanned spa visit can set you back on your money management journey. This is when the budgeting-to-zero strategy comes in handy.
The budgeting-to-zero strategy demands that retirees monitor every dollar of their incomes and what it is spent on. This strategy’s principle is that retirees shouldn’t have any money to spare after budgeting because everything is accounted for – giving every dollar a purpose.
- Prioritize Needs Over Wants
What are needs, and how do they differ from wants? How you distinguish between these two can help you prioritize what is important and streamline your efforts. Sometimes, it’s tempting to change an expense’s status from wants to needs, making you comfortable.
Needs are expenses crucial for your all-around survival. It may include food, rent, and other expenses crucial to your physical, mental, and financial well-being. Your needs should always be a mainstay in your budget. You can draw the line here, calling everything else in the wants category. The only time to spend on wants is when your needs are no longer in contention.
You can use the 50-30-20 rule, which allocates 30 percent of your income for lifestyle-enriching expenses after 50 percent has gone to your needs. This rule can make saving 20 percent of your income easier.
- Start a Side Hustle
Saving has a given rule; the more you earn, the bigger your savings net. Social security has limitations on your period allocation and other extras. You may lose your income if you go above that limit.
The best way to manage this limitation is to consider other income streams. It can be a side hustle like a part-time job or a consultancy gig, based on the vast experience you have in your industry.
According to CNBC, relocating during retirement is worth considering, especially if your state has high taxes. Another option to consider is downsizing to a smaller place. It saves you a lot of money that would have been spent on high utilities, mortgages, and insurance.
All in all, the poverty rate for seniors stands at nine percent. Still, some studies cite policy changes, global economic downturns, and the decline of pensions to contribute to a potentially higher poverty rate. This has made saving essential now more than before, especially for retirees.