Seniors On A Budget

By: Jody Smith

It may seem a bit ludicrous to be advising seniors about the importance of having a budget. But that's assuming that just because people have been around a long time, they've learned how to be smart with their money.

This isn't always a realistic assumption. And budgeting is so foundational to financial freedom that it can't just be glossed over or ignored. So, in the interest of those seeking financial security in their senior years, let's go ahead and state what should (but may not) be obvious.

To move toward financial freedom in your retirement years, it's important to have cultivated the habit of sticking to a budget. You need to know how much money you spend every month. Income includes wages from an employer, any income if you are self-employed, as well as investment income.

You need to know how much money you have coming in every month. Expenses include a mortgage or your rent payments, utility and car payments, insurance for car and your home, and other monthly expenses like food. Figure out your entertainment and transportation expenses.

You need to know what kind of savings you have, and what kind of debt you are carrying. Your income hopefully is larger than your expenses or your outgo. What's left is disposable income.

To stay within your means you need to spend less than you bring in. Are you earning less than you need? Are you gradually getting deeper into debt, or failing to save money because of this? Look for things you can cut like going out for dinner and areas you can downsize.

Don't get caught in the trap of thinking that once you've devised a budget, the work is done. The hard part has actually just started. Now you have to follow it. No alarms are going to go off, nobody is going to barge in to stop you if you decide to fudge the budget. This can encourage a false sense of well-being.

False because, you have just undercut yourself, though you don't yet feel the pain of it. That may not happen till after you've retired and are staring at smaller numbers than you thought you'd have -- and smaller numbers than you need for the quality of life you were shooting for.

One way to protect yourself from this unhappy future day of reckoning is to limit the use of your credit cards and debit cards. If you actually experience the cash coming out of your wallet, you are more likely to stay within the bounds you've set for yourself.

A good budget also provides for an emergency fund. A practical emergency fund should be enough to live on for six months or more should your income come to a stop for some reason. One method of gradually building an emergency fund would be to put 10 percent of your income when you get paid, and put it in savings. If you stick to your budget and don't tamper with this fund, you'll be able to watch it grow over time.

Jody Smith is a freelance writer for EmpowHER.com.


Sources:

Budgeting 101

http://financialplan.about.com/od/budgetingyourmoney/tp/budgeting-101.htm

How to Budget Home Finances

http://www.ehow.com/how_7534112_budget-home-finances.html

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