A new year is always a good time to establish (or re-establish) healthy habits. If you’re a senior, this would be a great time to take a close look at your financial habits and possibly make some adjustments to how you spend and save – especially in light of an economy in recession.
As we enter 2023 all signs point to a challenging time from an economic perspective. Although you’ll find experts with a wide range of opinions and perspectives, most believe we are already in or soon to be in a recession. How long it will last and how deep it will go is a really big question that has no clear answer at this point.
So, how should retired or soon-to-be retired people be thinking about their financial habits, and what are some possible adjustments they could make to help protect their nest eggs?
A recession can be especially challenging for seniors living on a fixed income, as it can lead to economic insecurity and financial strain. In this article, we’ll mostly focus on those living on a fixed income but most of our tips contain wisdom for anyone living on a budget.
For most retired seniors, money management is at the heart of maintaining financial security and stability. Reviewing your financial habits now can help you weather the current storm and continue to enjoy your golden years.
Understanding Challenges Faced by Seniors During a Recession
During a recession, seniors, especially those living on a fixed income, may face a number of challenges that require changes to financial habits, including:
- Reduced income: If a senior is relying on investments or other sources of income that are impacted by the recession, their income may be reduced.
- Increased expenses: The cost of living may increase during a recession, which can be especially challenging for seniors living on a fixed income.
- Decreased access to credit: A recession may make it more difficult for seniors to access credit, such as loans or credit cards, which can be a significant challenge if they need additional funds to cover expenses.
- Difficulty finding work: If a senior is considering returning to work in order to supplement their income, it may be more difficult to find employment during a recession due to high unemployment rates.
To address these challenges, seniors living on a fixed income may need to find ways to reduce their expenses and increase their income. This may involve cutting back on non-essential expenses, seeking out part-time work, or finding other ways to generate additional income.
It may also be helpful for seniors to seek out financial resources and support, such as seeking advice from a financial planner or contacting local organizations that provide assistance to seniors.
Financial Habits: Tips For Seniors to Consider Going Into The New Year
Review Your Budget.
Take a close look at your budget and if you don’t have one, this would be an ideal time to make one. But for now, let’s assume that you have one.
To review and adjust your budget in light of a recession, you can follow these steps:
- Gather all of your financial documents, including your budget, bills, bank statements, and any other financial records.
- Identify your fixed expenses, such as your mortgage or rent payments, and your variable expenses, such as groceries and entertainment.
- Determine your current income, including any retirement income, Social Security payments, or other sources of income.
- Compare your income and expenses to see if you are spending more than you are earning. If this is the case, look for areas where you can cut back on your expenses, such as reducing your monthly subscription services or cutting back on dining out.
- Consider ways to increase your income, such as taking on part-time work or monetizing a hobby.
- If you are having trouble managing your budget or making financial decisions, seek the help of a financial planner or another financial professional.
Be mindful when making purchases:
One of the easiest financial habits to “fix” is impulse buying. It’s easy to get carried away with impulse buying but taking the time to think before you make a purchase can go a long way in helping avoid overspending.
Consider if the item is something that you truly need versus just want. If it’s more of a want than a need, you may be better off waiting to see if the item is still desired after some time has passed. More times than not, the need loses this battle and the result is a win for your bank account!
Understand money management tools and resources:
There are money management tools available, such as websites and apps that can track spending, set money-saving goals and provide tips on money management. Take advantage of these resources so you have an understanding of where your money is going.
There are several established and trusted money management tools that can help you manage your finances effectively:
- Budgeting tools: Budgeting tools, such as Mint or Personal Capital, can help you track your spending, create a budget, and monitor your financial goals.
- Financial planning software: Financial planning software, such as Quicken or You Need a Budget, can help you create a comprehensive financial plan, including forecasting your future expenses and income.
- Investment tracking tools: Investment tracking tools, such as Betterment or Wealthfront, can help you track your investment portfolio and provide recommendations for diversifying your investments.
- Debt management tools: Debt management tools, such as Debt Payoff Planner or Tally, can help you track your debts and create a plan to pay them off.
- Financial advisors: Working with a financial advisor can provide personalized financial guidance and help you make informed financial decisions.
By using these tools and seeking the guidance of a financial professional, you can effectively manage your money and achieve your financial goals.
Set money aside for emergencies:
Unexpected expenses can pop up at any time, such as car repairs, home repairs, or medical bills, and can cause financial stress if you are not prepared. To help prepare for these types of events, it is important to set money aside in an emergency fund. An emergency fund is a designated savings account that you can use to cover unexpected expenses or financial emergencies.
To create an emergency fund, consider setting aside small amounts of money each week or month. This can help you build up a cushion of savings that you can tap into when unexpected expenses arise. It is generally recommended to aim for an emergency fund that covers three to six months’ worth of living expenses, but even a smaller amount can be helpful in case of an unexpected expense.
Having an emergency fund can help reduce financial stress and provide a sense of security, knowing that you have a source of funds to cover unexpected expenses. It can also help you avoid the need to borrow money or go into debt to cover unexpected costs. By setting aside money in an emergency fund, you can be better prepared to handle unexpected expenses and maintain financial stability.
Bonus Tip (a VERY important one)
It’s important to prioritize your physical and mental health during times of economic uncertainty. This can be a stressful and uncertain time, and it’s essential to take care of yourself to help cope with the challenges that you may be facing. Here are a few specific steps you can take to support your physical and mental health:
- Make healthy lifestyle changes: Eating a healthy diet, exercising regularly, and getting enough sleep can all help support your physical and mental health. Consider making changes to your daily routine to incorporate these healthy habits.
- Seek support from friends and family: Talk to your loved ones about your concerns and feelings. Sharing your worries with someone you trust can be a great way to relieve stress and find support.
- Seek professional help if needed: If you are struggling with your mental health or are having a hard time coping with the challenges you are facing, consider seeking help from a mental health professional. A therapist or counselor can provide you with the support and guidance you need to manage your feelings and work through any challenges you may be facing.
By making healthy lifestyle changes, seeking support from loved ones, and seeking professional help if needed, you can better manage your stress and take care of yourself.
By following money management tips and creating healthy financial habits, seniors can start the new year off right with a clear financial plan. With money management, you’ll be able to have greater control over your money and live a more secure life during retirement.
Readers of this article have likely experienced the economic roller coaster we live in. Are there any stories or lessons you’ve learned during times of recession? What are you doing differently this time around? Are there any financial habits you plan to change? Please share your thoughts, experiences and opinions in the comment section below.
This content is for informational purposes only and does not constitute financial or investment advice. Financial decisions should always be made based on individual needs, objectives, circumstances and resources. Before making any type of financial decision, consult a professional adviser. We are not responsible for any losses caused by reliance upon this information.