Living on a fixed income does not mean baby boomers have to go without the things they need to create a happy and satisfying lifestyle during retirement. As is true with most financial goals, you will need to carefully plan for a life without a paycheck. While it is possible to live a fulfilling life on a strict budget, it is important to remember that things like inflation and higher health care costs can complicate your best budgeting efforts unless you are fully prepared.
1. Prioritize expenditures.
When you consider the fact that food, shelter, and clothing are about the only “must-haves” in life, then it becomes easier to start cutting your expenses. Many of the bills we pay today weren’t even on our radar 20 or 30 years ago. Netflix, iPhones, and other gadget-related bills that so many of us think of as necessities are actually nonessential luxuries, especially when you have a fixed income.
When you change your mindset and start evaluating how much every single thing you buy adds to your quality of life, then you can begin cutting expenses that don’t significantly add to your happiness.
2. Track your expenses to determine how you are spending your money and reevaluate expensive habits.
By writing down the money you spend and keeping a record, you can get a better picture of money wasted. Maybe you make a habit of buying a coffee on most days from your favorite coffeehouse. That’s the type of small expense that adds up over the month. It is so easy to drop $3 to $5 on a cup of java without thinking too much about it. By keeping track, you’ll see firsthand that 20 or 25 coffees over a month cost about $100.
It is easy to make coffee at home and take it with you for a small fraction of that expense. Maybe, you decide to have coffee out exclusively with friends as a social activity on occasion and stop grabbing a cup from Starbucks to drink by yourself in the car, in favor of saving money.
As creatures of habit, we tend to spend money predictably. Below are some examples of frivolous expenditures to evaluate.
- Buying bottled water regularly
- Eating out frequently
- Manicures and pedicures
- Buying popcorn and candy at the movies
3. Substitute free or inexpensive spending options for more expensive choices when possible.
Monthly gym membership fees are one example of an expense that can be eliminated in favor of exercising at home or in the neighborhood. Granted, there are machines in most gyms that you might love, but resistance bands and inexpensive hand weights can be used to exercise those same muscles.
There is no denying that baby boomers have more free time for play than ever before. Doing some research about free or inexpensive entertainment options yields results. It is truly amazing the number of free concerts and events available. Especially, in larger cities, the number of activities is surprising.
One thing the recent coronavirus pandemic taught us all is that we can actually paint our own nails and cut our own hair when necessary. While being pampered is nothing if not wonderful, by reducing your trips to get a mani/pedi or haircut, you can save a lot of money.
4. Lower your housing expenses.
Typically, your rent payment or mortgage is the largest fixed expense you have to pay. That’s why these payments represent an excellent opportunity for lowering your overall monthly outlay. Since empty nesters are often left with a larger home than they need, downsizing offers one way to save substantial cash. Moving to a smaller home saves money not only in house payments or rent, but can also put a dent in costly utility bills, property taxes and insurance premiums.
As a retiree, you may be in a position to move to a cheaper locale since commuting to work is no longer a requirement. Some retirees take this idea a step farther and relocate to a foreign country where the dollar is worth more.
5. Build a health care fund.
Few seniors would argue with the fact that they expect to spend more money on health care expenses as they grow older. Being prepared for emergency cash outlays related to medical expenses is essential for baby boomers living on a fixed income. By having a separate account established for this purpose, you can rest easy that you have the funds you’ll need.
Financial planners can recommend the best type of account to use. Certain accounts offer tax advantages that others don’t.
6. Trade in a high car payment for a used car purchased with cash.
Car expenses are often the second-highest monthly outlay we make. Financing a new car is an expensive proposition. Boomers on a fixed income can do their budget a favor by purchasing an older car with cash to eliminate a costly car payment. This strategy will also lower car insurance premiums.
It is not uncommon to pay a $500 or $600 car payment with a $150 insurance payment on top of it if you insist on a late model car. Eliminating this huge transportation expenditure will free up substantial funds.
7. Grow your own food and spices.
Instead of planting flowers exclusively in your garden, consider planting a small garden. This practical hack will lower your food bill while providing you with organic food. You don’t need a lot of real estates to grow fruits and vegetables. Herbs and spices are also excellent choices for beginning gardeners or apartment dwellers with small patios.
Tackling the challenge of learning how to live well on a fixed income is something that baby boomers across this country are currently navigating. By following some of the advice above, seniors can relax knowing that they will have what they need throughout retirement.