Do you have a loved one in your life who’s living on a fixed income? If so, it’s important to help them set up a budget to stretch every dollar. For seniors, having a strategy in place can make the difference between living a comfortable lifestyle or dealing with a series of financial setbacks.
Wondering how to get started helping the senior in your life? Keep reading to learn some smart budgeting strategies for seniors on a fixed income!
Understand Budgeting Goals
A good place to get started is with a conversation about budgeting goals. If you only have one living parent, the financial road map can look quite different than it would for two living parents. And depending on your parents’ circumstances, they may be itching to lead an active lifestyle — or they may be struggling to stay afloat.
If your parent is sound in mind and body, they may want to travel and take advantage of their golden years in a more active way. Your loved one may have a European trip on the horizon, a kitchen renovation in mind, or a goal of setting aside money for grandchildren. Talk through these items to know what projected costs will look like.
It’s also important to bring up the reality that sometimes unexpected expenses — medical costs, major repairs, or fees — can derail plans. In anticipation of these moments, you’ll want to help your loved one understand the value of stashing some money in an emergency fund. Let them know you that you’re invested in their happiness and simply want them to be prepared.
By establishing budgeting goals with your loved one, you will communicate that you want to help them — not control them. Talking about finances with a parent can be a delicate line to walk, so make sure you’re allowing plenty of opportunities for your loved one to ask questions or offer input.
Know All Sources of Income
Talk with your parent about all sources of income they have. Know what their social security situation looks like, as well as any pension payments, investments, or other types of income that roll in every month. This will give you a clearer picture of your parent’s financial picture and help you determine a plan going forward.
If you determine that your parent does not have a 401(k) plan or another source of retirement income, this means they’ll need to extend what they can do with their social security payments even more. Since income can be a source of stress, you must approach these conversations gently and honestly. You want your loved ones to trust you to help them get the most given their financial limitations.
By knowing your loved one’s income stream, you’ll both be more aware of what purchases are feasible — and which ones aren’t. Accountability is an important part of budgeting, and you can establish it with transparent conversations.
Determine What Monthly Spending Looks Like
Have an honest conversation with your parent about what monthly spending looks like. Consider the typical range for utility costs as well as mortgage payments, prescription medications, doctor visits, taxes, and any other discretionary spending.
Write all of these expenses down, and track them over a few months to determine an average. You can use an app on your phone to track expenses, too, if you want to have the information handy at any time. By creating an itemized list, you’ll be able to determine some areas where savings may be possible.
For example, there may be opportunities to help minimize health-related costs with a better insurance plan. Take the time to find the best plans that offer lower prices on prescriptions, access to telehealth, and coverage for dental health and hearing. You’ll need to do some investigating, but you could help save your loved one some considerable money each month.
It’s also wise to talk to your loved one about the possibility of downsizing their home. If your parents still are living in your 3-bedroom childhood home with a walkout basement, they probably don’t need the space and may be unable to access the basement or attic safely.
There’s also a good chance that your parents are spending too much on utilities and avoiding necessary cosmetic updates to the home. Encourage your parents to move to an apartment, where they won’t be burdened with property maintenance or taxes — plus the rent may be cheaper than a mortgage payment. They’ll still have a strong level of independence, but without the upkeep.
You also may want to contact insurance and utility companies to inquire about monthly billing practices. Since utility bills can spike in the middle of summer or winter, that means that a fixed income will have to stretch further during those months — likewise when an insurance premium bill comes in the mail. Ask if you can have those costs distributed more evenly over a yearly billing cycle.
Smart Budgeting Involves Limiting Unnecessary Expenses
When you’re looking over your loved one’s weekly or monthly expenses, locate areas to make some cuts. There should be opportunities to slash grocery bills or limit entertainment costs.
Ask your loved one to see bank or credit card statements to verify monthly expenses. It’s easy to forget how you spend your money each month, and that’s especially true for many older people. Also, sometimes aging parents may be reluctant to divulge their secret trips to a favorite restaurant or store, so you’ll need to be gentle and encouraging as you probe their spending habits.
Make sure that your loved one knows that they’ll be able to set aside some money for the occasional splurges, but work with them to find costs that can be eliminated without reducing the quality of life.
Cut the cord on a cable package that’s not actively used and replace it with a less expensive entertainment option. Check to see how often your loved one uses the internet or any streaming services. If they’re not using these services, you can trim those monthly expenses pretty easily.
And look into their grocery bills. If your loved one has taken on grocery shopping responsibilities after the death of a spouse, they might not be a savvy shopper. You can help guide them toward healthier and inexpensive choices that will meet dietary goals and leave them satisfied.
Brainstorm New and Inexpensive Activities
One of the best things you can do is help your loved one find new activities to fill their days and add meaning to their lives. If your parent is unable to drive, this places a significant limitation on what they can do. Help them build a network of volunteers to take them to swim classes, church events, or community functions.
Look into free concerts, which are a great way to support your community and see some artistic talent. Many communities offer free outdoor entertainment on weeknights during the summer, and high schools and colleges often host theatre productions, concerts, and art shows throughout the year. These are low-cost cultural programs that will help the loved ones in your life stay involved.
Local libraries also host many lectures, cooking and craft demonstrations, and readings throughout the year. Nature centers are also a good bet. Opportunities to go birding, listen to ecologists talk about natural resources in the area, or see some wildlife up close are excellent ways to enliven an evening.
Since making budgeting spreadsheets can be tiring, start a separate sheet listing fun activities for your loved one. Work with them to create a calendar so that they have events to look forward to and the means to get there. They’ll save money, too, by opting for these activities over more expensive ones.
If you’ve invested hours into conversations, phone calls, and research, there’s no sense in letting it all go to waste. Make sure that you determine a system to keep track of expenses, check on progress, and stay on track.
Using a worksheet can be a helpful starting point, and it’s something that you can share with the senior in your life to keep expenses and income organized. A worksheet also is something that you can fill out together and update as needed. Many apps exist, too, to streamline the process.
Every month, make a point of checking in with your loved one. Ask about any significant changes to their health, upcoming projects, or living situation that could impact budgeting strategies in the future. Be proactive and remind them that you’re there to help them.
Put a Budgeting Strategy to Work
It can take some time to map out a smart budgeting strategy, but with persistence and focused conversations, you can help your aging parents and loved ones maintain a healthy budget. Approach the topic of budgeting in a caring and helpful manner so that your parents are willing to work with you. Ultimately, you’ll sleep better at night knowing that your loved ones are managing their finances responsibly.
When you’re ready to find more information on the best ways to approach senior care, check back with us for informative articles.