Budget

Moving in Retirement? 5 Things to Consider

photo of a village - moving in retirement

Many people are planning to relocate to a new place in retirement. But everybody wants to move for different reasons.

Some want to be closer to family and friends, others want to reduce expenses and downsize to a smaller home. Many new retirees want to move to a better climate. People might feel quite isolated during long and cold New England winters especially when they are older and no longer working.

However, there are still many people who would like to stay in their homes as they age. But it’s not always possible or practical. It may be too large to maintain or to be too far from people you love.

Whatever your reason to move to another place in retirement, keep in mind that your new location meets your needs in the long run. Because relocating is not easy. It can be expensive and stressful.

Before actually moving to a new state or community (even abroad) in retirement, there are many things to consider.

Access to healthcare.

As much as we might want to deny it, we will all need more health care as we grow older. That means we will need easy access to good hospitals, medical centers, and quality healthcare providers.

Also, do not forget to consider other health services such as physical therapy, massage therapy, and other services you might want to use.

If you are planning to move to a small coastal town in Maine, you will be quickly disappointed if the closest hospital is two hours away. Not to mention the tedious task of finding new medical care providers whom you like and trust. So, before you move, make sure that you know the local healthcare standards.

To live closer to family or not?

Most of us have children, grandchildren, and a social network of friends. Numerous studies have shown that one of the absolute musts of a happy retirement is proximity to friends and family, which is good for us both mentally and physically. If you move away, you can make new friends, but you cannot make new family members.

How often do you think you will visit relatives you left behind? How much does it cost for you and your family to make a round trip? You should be asking yourself these kinds of questions if you are planning to retire in another state or abroad.

Don’t underestimate the emotional impact of leaving your family and friends behind. And perhaps the costs of staying connected. Will you feel the need to travel back often?

Certainly, we interact these days through Zoom and other virtual platforms. That’s a convenient way to speak with each other and share what is happening in our lives. But still, is it the best way to feel connected? You might miss spending birthdays, holidays, and other events together with your family or friends.

On the other hand, many retirees choose to move out of state to be closer to their children and grandchildren. While it can work great for some families but not for others. Maybe you leave your friends behind and move closer to your children only to discover that they are so busy with their careers and schools that you see them much less than you’d hoped for. It happens.

Just accept that moving your physical, financial, and social life to a new state is a big task and will come with some unexpected challenges. You just need to figure out what works for you both financially and emotionally.

Is Relocating in Retirement a Good Idea?

Pay attention to taxes.

Even in retirement, you can expect to pay taxes. Some states are more tax-friendly than others. So, it is important to know the situation before you decide to relocate.

For example, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and Alaska states do not have a state income tax. All other states do.

So, if we move from Massachusetts where we live right now to Florida, we will get rid of a state income tax. But if you move from New Hampshire to South Carolina, you gain a tax. And there are other dues and fees to consider. Before moving to a new state and community, find out how much people typically pay in property and sales taxes.

The federal government taxes Social Security benefits. In addition to that, certain individual states also apply their own income tax to Social Security payout. Fortunately, even those states do tax Social Security, they often provide exemptions or ways to reduce or eliminate the tax, typically based on your age or income.

Hence, if you rely on Social Security as your main income, it is important to learn how Social Security benefits are taxed in your new state.

Can you really afford it?

One of the biggest reasons that people move to a new area in retirement has to do with money and the cost of living. We move to a state that is less expensive to make our retirement savings last. That could come in the form of more affordable housing costs, lower taxes, cheaper healthcare, or a combination of all of these together.

Cost of living in a new location.

It is not a secret that your cost of living will differ significantly from state to state and even town to town. If you have put together your retirement budget, you will know approximately how much you can afford to spend. What will your costs be in the new location?

Look at the houses in the area you are planning to relocate, and find out how much utilities, home repairs and maintenance, yard care, and other typical living expenses cost on average. Other costs are homeowner’s association fees, condominium fees, homeowner’s insurance, and transportation.

Homeowner insurance.

The average cost of annual premiums for homeowners’ insurance fluctuates from $376 to $3,576 depending on the location. The potential for local natural disasters such as hurricanes, tornadoes, earthquakes, fires, and flooding plays a role in those premiums.

It’s worth researching how much more or less you have to pay for homeowner’s insurance.

House size – big or small.

When shopping for your new home think about the size. Do you need three bedrooms and two bathrooms for two people even if you expect visits from your children, grandchildren, and other relatives? They can always stay at nearby hotels or rent an Airbnb.

Even if you help to pay for the hotel bill it will be cheaper than the extra money you have to pay for a large size house. Think about real estate taxes, insurance, maintenance, and yard care.

How to pay for your new home?

The cost of housing is typically the largest category in your budget. Keep this in mind while deciding how to pay for your new home. Do you have enough home equity or no mortgage at all to buy your new home with cash? In this case, you do not need a mortgage.

If you use the proceeds from the sale of your home to buy a new one with cash, consider how you will invest the rest of the money. But if you do not want to use all of the proceeds or the proceeds of the sale are not enough, you should consider a mortgage.

Keep in mind that retirees often face certain challenges when applying for a mortgage. The biggest challenge is to show lenders where their income is coming from.

Sources of income can be Social Security, dividend income, rental income, withdrawals from retirement accounts, etc. Your income should be well documented, sufficient, and sustainable to apply for a mortgage.

Location and community.

When you are thinking about moving to a different part of the country, location is important. Every place is different.

First, think about the type of lifestyle you want as you age. What kind of activities do you enjoy and what location might be a good fit for you?

If you like entertainment and going out, consider a city with lots of dining-out options, museums, art galleries, and concerts. If you love to spend time outdoors, you may want to live in a place with a warm climate and lots of outdoor activities.

Before you move, do your homework, and find out what is available in the town you will be moving to.

For example, if you choose to move to an active adult community, ask people who live there what is their lifestyle. Plan to visit the community to check it out yourself. Would you be comfortable living there on a full-time basis? Would you like the lifestyle and the whole atmosphere there?

If you are relocating to a single-family and condominium neighborhood, find out what kind of recreational activities and social life are available. If there are any good quality medical services and hospitals nearby.

If you plan to travel or expect visits from the family, consider the proximity to an airport. Will you need to have connections to international flights?

Hence, before you decide to buy a house in your new location, rent a place first to give it a trial. A place that seems like a dream may be less than what you expect in reality.

As we age, our comfort and sense of happiness are important. If you consider moving in retirement to a new place, you should find a place that brings you joy and happiness.

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2023 New Year’s Resolutions for Baby Boomers

by Maggie Leave a Comment

Happy New Year 2023!

Each new year offers a great opportunity for a fresh start and new beginnings. Setting resolutions is a long-standing tradition. However, only about 10% of people achieve their New Year’s resolutions each year. And many people stop working towards their resolutions after just the first two weeks.

When it comes to finances, 2022 was a challenging year. With high inflation, rising prices on everything, and volatile stock markets ‘2022 was the sixth-most volatile year since the Great Depression’.

Almost 81% of Americans are concerned about their financial New Year’s resolutions and believe that inflation makes it harder to meet their goals.

But making New Year’s resolutions is a great way to change your life for the better. The new year can be a great time to think about what is possible in your near future. Also, the new year is a great time to set some good financial goals. But make sure to set some small realistic goals that will help you work towards larger goals.

Even though we all like to set up new goals and resolutions, different generations have different goals for the new year.

If you are a baby boomer, here are my tips and advice to help you make your 2023 New Year’s resolutions.

1. Eliminate any debts.

Why is it so important to reduce or eliminate debt?

Debt is always a slippery slope because the interest will eat massive chunks of your spending money. The faster you can get rid of it, the faster you can get ahead.

That is why the beginning of the year is a great time to sit down and create a debt payment plan.

There are two strategic and popular methods to get out of debt faster. The Avalanche method helps to reduce the debt that carries the highest interest rate. The Snowball method helps to get rid of debt with the lowest balance first, and then move on to the next lowest one.

The way the snowball approach works is you arrange all of your debts from largest to small ones. Pay off your smallest debt first. Then once the smallest debt is paid off, the money you were paying toward it will be applied to your next smallest debt.

With the avalanche approach, you will start paying off the debt with the highest interest rate and then move to the next highest.

How to Pay Off Debt Before You Retire

Goals to get out of debt:

Identify what debt to pay first.
Set up a debt payment plan.
Consider reducing other expenses to pay debt faster.

2. Increase retirement savings.

Sometimes we do not realize how expensive it will be to retire.

Building a nest egg that allows for retirement income to be close to 100% of pre-retirement income is a hard financial task. Unfortunately, very few people are confident in their retirement savings goals. Most people do not have the proper number in mind, and they forget the impact of inflation on their savings.

In terms of total retirement savings, retirees need to be able to live on no more than a 4% annual withdrawal from their retirement assets. You are not ready to retire if you have minimal savings. Social Security is generally not enough for a comfortable retirement. You will need to keep working and saving more money.

When you are a few years away from retirement, being short on retirement savings can be problematic. The best option is to start reducing your expenses, so you can put more money into your retirement savings.

Goals to help you save:

Set a monthly savings goal.
Analyze your budget to see how much you can save.
Reduce your spending in a specific category each month.
Save a portion of your paycheck each month.
Increase your contributions to retirement plans – 401(k), IRA, Roth IRA.

Helpful Posts:

3. Save more for emergencies.

One of the biggest worries about money among baby boomers is that you do not know what will happen in the future.

You do not know if it would be enough to maintain your lifestyle in retirement and if you would not run out of money later when you are in your 80s or 90s.

When you retire, you do not have the security of your job to rely on and have to live on a fixed income. While you cannot exactly plan for the unknown, you can create a backup plan for emergencies.

In general, every household needs an emergency fund to cover unexpected expenses and it should be between 3 to 6 months of household income. But for retirees (in an ideal world) 1 to 3 years of living expenses should be set aside in cash.

Even though your emergency fund cannot cover everything, it can still reduce the money you have to borrow from your family or use credit cards and increase your debt.

The beginning of the year is a great time to put aside extra money into your emergency fund.

Goals for an emergency fund:

Figure out how much you need in your emergency fund.
Create a separate account (money market account, bank savings account, certificate of deposit.
Set up automatic transfers to your emergency fund each month.

4. Create a retirement budget.

Creating a retirement budget, along with a strategy of how you will draw money from your retirement funds is an excellent New Year’s resolution for many baby boomers.

Start by setting up a budget using the amount of money you will have when you retire plus a Social Security paycheck. Do not forget the emergency expenses like home maintenance, car repairs, and medical bills. See if you can live on that budget.

If you cannot, you need to come up with another plan. Think about downsizing if you are a homeowner or relocating to a more affordable area so you can put that extra money into retirement savings.

Think about how much you want to save and how much to spend in 2023. Sticking to your budget can help to know where your money is going. If you want to save more money for your upcoming retirement, begin eliminating some expenses that may not be important to you anymore.

When you retire, you do not need a lot of things that you did when you were working. The costs of commute, take-out lunches and business clothes will go down. On the other hand, you will start spending more money on travel, hobbies, and activities.

Helpful Posts:

Goals for retirement budget:

Identify your potential retirement income.
Calculate your future retirement expenses by looking at your current costs of living.
Budget with your spouse or partner.
Calculate your net worth.

5. Reduce your expenses.

One of the simplest parts of your financial life to control is spending.

The beginning of the year is a great time to look at your personal spending and set up new goals. 2022 has been full of change and adjustment with many people preferred to work remote. There is a good chance that your spending habits have changed as well.

How did you do last year? Did you get a full picture of your finances and know how much money you have saved (or not) in 2022?

If you struggled last year, decide how to improve your financial situation in 2023.

Look at your credit card and bank statements and see what expenses could be avoided last year, and plan to cut them this year.

Keep in mind, that balancing your income with your spending is the key to saving more money for retirement.

Goals for reducing your expenses before retirement:

Find ways to reduce transportation costs.
Pay off your mortgage or reduce housing costs by downsizing.
Eliminate high-interest debt – credit cards, personal loans, student loans.
Evaluate your insurance coverage.
Figure out where you will live in retirement.

Helpful Posts:

6. Manage your overall stress and focus on happiness.

We all know that financial stress is not good for our health. Financial anxiety negatively impacts not only our health, but our mood, home and social life, marriage, and ability to pursue our dreams and passions.

Unfortunately, in the current economic climate, it is unlikely that our financial difficulties will disappear overnight. However, it does not mean we have to give up. Perhaps, we need to take small steps to ease our stress levels and focus on happiness and not money.

Everyone’s dream is to have a happy family and be financially secure. So, if you want to be happy and have a secure retirement, try to:

Stop accumulating stuff – Spending money on accumulating stuff does not bring happiness and might put you in debt. Downsize and de-clutter your home, so you can spend more time enjoying your life rather than maintaining it.

Think about experiences – It is a proven fact that you are happier when you spend your money on experiences than on stuff. Accumulating more stuff does not make you happy but doing interesting things do.

Focus on your priorities – Know what is important to you and stop worrying about the rest.

Express gratitude – Be grateful for the good things in your life. It is easy to focus all your attention on the negatives when you are overwhelmed by financial uncertainty and money worries. While you do not have to ignore reality, you can be grateful for many small things in your life. Take a moment to appreciate the beauty of the sunset, flowers in your garden, a gorgeous sunny day, or just a good book.

Find ways to be kind and to help others. These efforts help you see beyond your own financial problems to give something back to the world.

Have you thought about your 2023 resolutions yet? Do you have any financial goals?

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How to Host a Thanksgiving Dinner on a Budget

by Maggie Leave a Comment

woman at dinner table -how to host Thankgsgiving dinner on a budget

Thanksgiving is the mother of all Dinner Parties!

The cost of Thanksgiving dinner can be high in a regular year. But with growing inflation and rising prices on everything including gas, energy, and food, you might be worried about the cost of hosting a Thanksgiving dinner this year.

According to Politico, grocery prices are predicted to increase by 11 percent by the end of 2022. While that is true for all food categories, prices of milk, eggs, fruits, poultry, and beef will be affected the most. The real reason for this is high inflation and supply chain issues.

Dinner is the biggest expense of Thanksgiving. People usually spend a lot of money preparing a variety of traditional Thanksgiving dishes including the giant roasted turkey. Luckily, there are many ways to prepare an inexpensive Thanksgiving dinner.

I have several practical tips to help you host a Thanksgiving dinner even on a tight budget.

Make a plan.

If you are traditionally a guest, you have an easy role to play, and probably do not need to set a great deal of money aside to have a Thanksgiving dinner party successful. If you are the host, the holiday celebration is going to be more complicated.

When you host an event, you have to start with a plan. The first thing to do is decide what your holiday budget will be. This first step will determine everything from what kind of food you will be serving to how many people you will invite.

While we want to make Thanksgiving special for our family and loved ones, sometimes it becomes a challenge between hosting a perfect holiday dinner and cutting the costs of it.

Put together a guest list.

How many people will be attending your party? The guest list will determine how big is your turkey, how much food you will have to cook, and where you are going to seat all your guests. Cooking for twenty people costs more than cooking for four.

Hence, the larger your group, the greater the grocery bill.

Create your Thanksgiving menu.

Once you have decided on your guest list, it’s time to plan the menu. When it comes to decide what dishes will be served on Thanksgiving, every family has its own traditions.

My menu looks something like that:

One or two appetizers – stuffed mushrooms or baked brie in puff pastry
Turkey roasted with celery, onions, carrots, and parsnip
Gravy
Potato au gratin or mashed potatoes
Roasted Brussels sprouts or green beans
Honey glazed carrots
Homemade cranberry sauce
Dinner rolls
Coffee and dessert

If you want to cut the costs of your Thanksgiving dinner, do not be shy asking your guests to bring something. You cannot be responsible for everything this year such as food, beverages, desserts, and decorations.

Thanksgiving is all about everyone sharing the meal. Why not make it easy on yourself this year and prepare a list of what you need when guests ask how they can contribute.

15 Thanksgiving Appetizers That Don’t Take Much Effort

Prepare your grocery list.

When you are ready, you can create a grocery list from this menu. Do not presume that you have all the ingredients. Check the cupboards and pantry. Staying organized will help you avoid running to the supermarket the day before Thanksgiving.

Never go to the grocery store without a shopping list. It is important to stick to your list.

Throwing random things into your cart will end up costing you more than your planned budget. Keep a running list on your phone (I use the Notes app on my phone) with the items you need to shop for. This way, you can check items off as you toss them into your shopping cart.

Get your shopping done early to avoid the holiday crowds.

Another way to cut the burden of the grocery bill is to start buying your ingredients several weeks ahead of time. Consider buying a few items each week before Thanksgiving and buying the ingredients when they are on sale.

Prepare Thanksgiving Dinner:

1. Cook dinner from scratch.

We all know that we pay for convenience while ordering a pre-cooked meal. Prepared food whether it be from a restaurant, take-out, or from the grocery store, is generally more expensive than cooking your own meal from scratch.

But with a little extra time and planning, cooking Thanksgiving dinner from scratch can save you a lot of money. I know it is tempting to go with instant mashed potatoes or pre-made pies. But you will pay more for these conveniences.

I make my own mashed potatoes. Making potato au gratin or mashed potatoes from scratch is way cheaper and it tastes more delicious than the one from the box.

Making your own pies is pretty simple as well, even though time-consuming process. I have to admit I do not make my pie crust from scratch because I buy ready-made ones. But I always make my own pies and they taste homemade without all the work.

You may not feel like you are saving money, but the savings will really add up to your final grocery bill.

2. Save money by buying frozen vegetables.

You can save a lot of money by buying frozen vegetables instead of fresh produce.

It is hard for retailers to keep their prices low on produce when they have to ship it out from warmer climates to colder areas. Frozen vegetables contain the same nutrients as fresh produce. In the end, you will not notice any change in quality if your veggies come straight off the frozen shelf.

3. Use canned goods.

I am not a big fan of canned goods. But I have to admit that canned goods can be a frugal cook’s best friend.

Canned goods contain plenty of flavors and are required fewer steps to make them ideal for a party meal. Hence, you can successfully add some canned goods to your Thanksgiving dinner recipes.

When cooking mashed potatoes, use canned chicken broth or warm milk instead of water to make them more flavorful. Also, canned cranberry sauce is a great addition to roasted turkey thanks to its sweetness.

Budget Thanksgiving Menu Ideas

While spending the day cooking and preparing a meal for the party, you need to make sure that you get to enjoy that day too. Think about what you can do to save time. If any foods that can be prepared in advance, then get them ready and save time for other items.

4. Host a Thanksgiving “Potluck” dinner.

Hosting a Thanksgiving potluck dinner can make things a lot easier on you and more affordable.

If you are hosting a large group of people, consider making the turkey and a few simple side dishes. Then ask your guests to bring their favorite dish or dessert. Most people would like to contribute.

Also, if you are really short on funds you can invite people for appetizers and desserts instead of an entire meal. No one is forcing you to host a traditional Thanksgiving dinner. You can always invite people and prepare a big dinner next year when food prices are lower and your finances are in better shape.

5. Split the cost of alcohol.

Alcohol is expensive and can run your bill up quickly.

You can split the cost of alcohol with your guests. Ask your guests to bring their beverage of choice. Also, you can delegate to one or two of your guests to be in charge of bringing a bottle or two of alcohol.

6. Plan for leftovers.

It is always a smart idea to make a little extra food, so you have enough leftovers.

Foods like turkey, mashed potatoes, gravy, stuffing, and roasted veggies can become the main ingredients of another dish. This will give you the option to make lunches or dinners for a day or two after the crazy busy Thanksgiving weekend. There is nothing better than having your meals prepared without relying on your other groceries or cooking.

However, I often find myself tired of eating leftovers after 2-3 days, so I prefer to freeze them. After a few weeks, I can make a quick meal out of my freezer without going grocery shopping.

How to save money on Thanksgiving party décor.

Thanksgiving party table -how to save on Thanksgiving decorations

One of the best parts of planning a party is picking out decorations.

I really love decorating our home for Thanksgiving – it’s so much fun. I usually use what I have. Over the years, I have purchased a few autumn-inspired décor items which pair well with fresh flowers, candles, and seasonal items like pretty small pumpkins and gourds.

You can always dress up your home with inexpensive Thanksgiving decorations from local stores. Hence, buy quality but cheap decorations that can be reused. Store discounts on autumn-themed decorations offer great deals on tableware, candles, centerpieces made of wood and flowers, faux pumpkins, and more.

Also, check your stock from the last year. You would be surprised how much money gets wasted when we buy a similar item.

Select a theme for your Thanksgiving party and then decide on a few pieces that fit your style by using your own resources.

If you are working with a small budget, there is no need to get excessive with the décor. Grab some supplies and create handmade décor pieces. DIY Thanksgiving decorations allow you to add your own special touch to the party.

Your dining room table will be the star of the show at the Thanksgiving party. As a host, you will want to make sure to dress it up to the best!

The perfect way to dress your table for Thanksgiving dinner is to have a table setting complete with seasonal-style décor. Set the scene and use your best china dinner plates, glassware, utensils, cloth napkins, and placemats. Add a few customized items like a table runner, napkin rings, and a centerpiece.

We all know that Thanksgiving is the time for family and friends. Therefore, we do not need to spend a huge amount of money on hosting a Thanksgiving dinner party to have an amazing holiday!

What are some of your favorite ideas for hosting your Thanksgiving dinner on a budget?

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8 Ways to Get Your Finances Under Control

by Maggie Leave a Comment

hands holding us dollars-get finances under control

Life can be difficult, and our finances do not always work out the way we want. The cost of living is rising due to the current high inflation. As a result, your expenses are getting maybe too high compared to what you are making monthly.

Living paycheck to paycheck can be a challenge in today’s world. That is why I am bringing you 8 ways to get your finances under control so you can do a better job managing your money.

1. Start by understanding your current financial situation.

The first step for taking your finances under control is to understand your current financial situation.

Gather all your bills together. Log into your bank accounts and mortgage company. Look at your credit card and car payment statements to figure out how much you owe.

Once, you have gathered all your financial information, sit down, and take a look at it. Get a sense of your financial baseline:

How much is your debt – credit cards, student loans, personal loans
How much is your mortgage balance
What assets do you have – real estate, pensions, stocks, bonds, bank account savings, retirement accounts, cars, boats, etc.

Then, bring all your information to one place by writing it down on a piece of paper, or in the spreadsheet document.

2. Make a budget.

Many people avoid dealing with budgeting, but the easiest way to get control of your finances is to make a detailed and realistic budget that you can stick to.

Do not set up unrealistic goals about how much you are going to save or how much extra money you are going to earn. Use your budget to follow your actual finances.

You can budget manually using a spreadsheet on a piece of paper, a mobile app, or PC software like Microsoft Excel or Google Sheets. Another great way to use budgeting tools is to download and print different types of digital products.

If you have not created any budget before, start by using Microsoft Excel or Google Sheets and put together a spreadsheet document. Write out your monthly expenses on the left side of the spreadsheet.

These could include fixed expenses:

Mortgage/ Rent
Utilities
Car payment/ Car insurance
Phone/ Internet

and variable expenses:

Groceries/ Food
Clothes/ Personal care
Dining out/ Entertainment
Activities/ Gym
Travel/ Vacation

After that, divide your spreadsheet document and on the right-side type in the amount you are planning to spend each month and the actual spending on each category. At the bottom add up the total to make sure that you are not spending more than your income.

Spreadsheet software like Microsoft Excel or Google Sheets is designed for budgeting expense tracking. When you enter amounts in each category, the program automatically performs calculations and adds to the total. It’s easy to use and you do not have to have math skills.

Once you have created your budget, make sure you stick to it. Your budget is your financial road map. It shows the real picture of what you can live on and what you can afford to spend each month. If you are constantly going over budget, you need to cut your spending.

You should try to live on the popular 50/30/20 budget rule. The goal is to spend around 50 percent of your after-tax dollars on necessities, no more than 30 percent on what you want, and a minimum of 20 percent on savings and debt payments.

The important thing to remember is that budgeting helps to build wealth over time by freeing up extra money for savings.

To help you get started, here are a few useful articles you may want to read:

3. Track your spending and know where your money goes.

I still think that “going on a budget” feels like “going on a diet” because you have to cut back on many things. That is why many people resist the idea. However, you can feel more in control of your finances know where your money is going and become a smarter spender.

The best way to track everyday spending is really simple. You just need to keep all your receipts for the day, then add up each type of spending by category. Add in the total for that specific day using your spreadsheet document or mobile app.

laptop, notepad - get finances under control

Ask everyone in your family who spends money track their spending for a few months. At the end of each month, look at your spreadsheet and see where your money is going. If your spending is going off the rails, you need to cut back your expenses.

4. Cut expenses and live within your means.

We all love to use credit cards for convenience but sometimes they make it too easy to spend more than we have.

If you leave your credit cards at home and go shopping only with cash in your wallet you will spend less money. If you try shopping with cash for a while, you will be aware of how much you spend regularly. People who do this typically spend 20 percent less.

One of the best ways to cut your expenses is to save on luxuries like dining, entertainment, and international travel.

Today we live in the world of high inflation and rising prices on food, housing, and energy. Many families may need to reduce their expenses in other areas to make ends meet.

If your budget is still out of balance, it might mean more sacrifices. To keep your budget on track, you may want to cut back on frequent expenses:

Delivery memberships
Streaming services like Netflix, Spotify, and HBO max
Your cable bills
Gym membership and exercise classes
Data storage subscriptions like iCloud and Google Drive
Unneeded insurance
Costly gifts and seasonal expenses
Pricey cellphone plan
Takeout meals
Full-priced items
Playing lottery

However, do not try to remove all luxuries or things that make you happy.

Being too strict with yourself can cause depression which leads to budget frustration. If your budget leaves no wiggle room, it is impossible to follow it for a long period of time. Do not set up yourself for an overly restrictive or unrealistic plan.

5. Build an emergency fund to keep finances under control.

Everyone needs an emergency fund. Your emergency fund should give you peace of mind because it helps you cover large or unexpected expenses.

Once you have your spending under control you can start building your rainy-day fund.

Many experts recommend aiming for an emergency fund with 3 to 6 months of living expenses. Sometimes you need to increase the fund up to 12 months of living expenses. Even though your emergency fund cannot cover everything, it can still reduce the money you have to borrow from your family or use credit cards and increase your debt.

You should never tap your emergency savings for expenses like leisure travels, holidays, or wedding gifts. These expenses are non-emergency expenses.

A true emergency is a situation that demands immediate action:

Major car repairs
Health emergency co-pay or large deductible
Unexpected home repairs
Emergency travel

As I said before, having enough money to fall back on means that you do not need to rely on family or credit card debt to cover emergency expenses.

Most people hold their emergency funds in bank savings accounts for easy access.

To start your emergency fund, you can use automatic savings plan to stash some money. If you do not already have a savings account, open one at the same bank where you have your checking account. Then link your savings and checking accounts, so you can transfer money between the two.

The checking account is for your everyday spending to cover the bills and any extras.

The savings account is where your savings will grow over time. Set up automatic withdrawals to pull the amount you need each week from your checking account into your savings.

However, if you want to use online banks like Capital One 360 or Ally Bank you can get a better interest rate than your local retail bank.

Also, you can open high-yield savings account that you cannot dip into it often.

Best High-Yield Savings Accounts

6. Reduce or pay off your debt.

If you look at your budget and do not know how to make headway, it’s time to be honest with yourself.

The hard truth you have to face is that you cannot take your money under control because you are probably in debt. That means that you are spending more than you are earning.

Why is it so important to reduce debt?

Debt is always a slippery slope -the interest will eat massive chunks of your spending money, making budgeting difficult. When possible, avoid debt by paying it off fast and not creating new debt.

When you carry high-interest credit card debt it affects your credit score and your financial progress. Once your debt is paid, you can focus fully on saving, investing, retirement planning, and other financial goals.

There are two strategic and popular methods to get out of debt faster:

The Avalanche method helps to reduce the debt that carries the highest interest rate.
The Snowball method helps to get rid of debt with the lowest balance first, and then move on to the next lowest one.

The way the snowball approach works is you arrange all of your debts from largest to small ones. Pay off your smallest debt first. Then once the smallest debt is paid off, the money you were paying toward it will be applied to your next smallest debt.

With the avalanche approach, you will start paying off the debt with the highest interest rate and then move to the next highest.

Debt is always a big weight on your budget. The faster you can get rid of it, the faster you can get ahead.

Here are other strategies to help you reduce or pay off debt faster:

Refinance a home loan, student loan, or a personal loan
Negotiate for a lower interest rate on credit card debt
Transfer credit card debt to a 0% balance-transfer credit card
Negotiate for a lower interest rate on a home equity line of credit (HELOC)
Make bi-weekly mortgage payments

The process of paying down your debts can be satisfying. It will work as a big boost to see progress on your payments.

7. Invest your money and save for retirement.

We all know that it is important to save money in your bank account for emergencies. Having enough money to cover unexpected issues is critical. However, we do not want to keep all our extra money in bank accounts because interest rates are not high enough even to keep up with inflation.

Investing allows us to set aside money that grows steadily and can increase over time. While we might not see great gains in the short term, this is a great way to prepare and save for retirement.

If you have a workplace retirement plan like a 401(k), use that for your retirement savings with automatic withholding. If you do not have a workplace account, consider alternatives like IRA, Solo 401(k), and after-tax money accounts like Roth IRA.

8. Stick to your financial goals.

When you are trying to get your finances under control you need to stick to your goals and give them time.

Keep a close eye on the progress you are making. Keep in mind that paying off debt, tracking spending, or reducing expenses is not going to happen overnight. Take small steps toward the final outcome.

Each person’s financial goals are different. Start your process by identifying your top priorities. Then figure out how much money you need for each goal and how much time you need for reaching it.

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Enjoying Your Golden Years on a Fixed Income

by Maggie 4 Comments

a couple at table with coffee cups - enjoy golden years of a fixed income

Today, I have a great guest post to share from Joyce Wilson. Joyce is retired and wanted to offer her mini-guide of several tried-tested strategies on living life to the fullest during your golden years on a fixed income.

Seniors who manage to save enough for retirement are as rare as hen’s teeth. With the median retirement savings for workers pegged at just $97,000, an increasing number of seniors are working post-retirement age.

You need to save $1.04 million in 2021 to retire comfortably if you are wondering, according to Annuity.

If you have not saved enough, do not fret. There are countless seniors in the same boat as you.

Furthermore, many of them have managed to set up fulfilling, enjoyable lives for themselves, despite drawing a limited income every month.

As a matter of fact, studies suggest seniors are happier than expected.

And you can be the same way!

If you want to learn how to enjoy your golden years on a fixed income, here is a mini-guide of several tried-tested strategies from Joyce Wilson.

Know where your money is going.

It is basic but essential – you need to have a clear, big-picture view of your finances. Knowing exactly how much money you have coming in and going out prepares you mentally and emotionally for cutbacks. You will know what your necessary expenses are and what you cannot afford.

Moreover, the clarity makes it easier to plan for the future. If you do not enjoy tracking your money (who does?), you can automate the activity through a budgeting app.

The Best 8 Budget Apps for 2022

Reading bank statements will also work in a pinch.

Create a budget.

You need to limit your access to spending money. Otherwise, you are going to spend too much, too quickly. Essentially, budgeting – and self-discipline – is non-optional.

Give yourself a fixed paycheck to live from each month, maybe by setting up a bi-monthly deposit to your checking account. Set aside money for necessary expenses and emergencies. Of course, do not go overboard with limits – give yourself some “flex” money for other expenses. As with all things in life, aim for a sustainable balance.

Be savvy about debt.

Debt is always a slippery slope – but especially so when you are a retiree. The interest will eat massive chunks of your spending money, making budgeting impossible and draining your retirement fund dry.

When possible, avoid debt – throw your credit cards away and save until you can afford two of whatever you are buying. If you are forced to borrow, prioritize paying the amount back quickly. Also, ask for assistance from a local agency for seniors, and consolidate the debt (for a lower interest).

Invest in your health.

Your health can be your biggest asset or greatest weakness. If you take care of your health, you won’t have to spend your money on doctor visits and hospital bills. Furthermore, good health will make you happy and make it easier for you to enjoy your life or work.

10 Healthy Habits for Seniors to Keep

It is never too late to work on your health. Go for long walks, take up an exercise routine, eat more greens, and do away with stress through activities like meditation.

Get creative with your meals.

Your meals do not have to be a large, ongoing expense. Get creative and plan them out to save money.

a bowl with veggies - eat healthy food in retirement

First, shop for generic brands instead of premium ones – there is little to no difference, as Foodtown can confirm.

Second, shop at the right time, in the right place. Go to a discount store at the end of the day, before the food is to be thrown out, for the best deals.

Third, make a list of your needs and stick to it when you go shopping.

Fourth, have filling meals using “stretcher” ingredients like pasta and potatoes. Also, try Asian recipes – they can be delicious and affordable at the same time.

Last, but not least, when eating out, go to places offering deals and discounts.

Find part-time, low-stress work.

You may have to work to support yourself – but it does not have to be a difficult, stressful endeavor. Freelancing, for instance, is a wonderful, stress-free option. It gives you freedom and flexibility, not to mention can bring in some good money.

If you are starting up your own gig-based business, forming an LLC is a good idea.

It protects your personal assets from lawsuits and offers other advantages like tax benefits, less paperwork, and added flexibility. To save big lawyer fees, you could file the paperwork yourself or use a formation service. States have regulations around forming an LLC. Check the local rules before you continue.

Consider alternative living options like downsizing.

Depending on where you live, your living expenses will account for as much as a third (or more) of your monthly expenses. With some adjustments, you can take away from those costs. You could downsize, moving to a smaller place that requires less upkeep (and money) to maintain.

Downsizing is possible with a smaller house, condo, or even active living arrangement.

If you want to stay where you are, you could rent a room out to someone, if it is an option. Likely the best way to save is to rent a room, instead of an entire home.

Choose free or low-cost entertainment.

You do not necessarily have to spend money to entertain yourself.

There are countless free activities that are just as enjoyable as paid ones.

Some examples are reading a book, visiting a library, museum visits, community events, concerts and festivals, hobby groups, and volunteering activities. Technology – the internet, apps, and games – can be your best friend when it comes to entertainment. You can ask your grandkids for advice.

Buy second-hand.

Buying second-hand is good for your wallet (and the planet in general). If you look hard enough, you can find as-good-as-new items at rock-bottom prices. This includes clothes, furniture, appliances, gadgets, and more.

Websites like Poshmark, Geebo, Mercari, and Craigslist allow you to buy (and sell) second-hand.

You can also, of course, visit nearby flea markets, thrift stores, goodwill sites, and charity organizations.

Final Thoughts

Age offers many advantages – like hindsight, experience, and an appreciation of the smaller things. Take advantage of your age to create and recreate your life as necessary.

Money is not everything, and your imagination can be your best friend.

Last, but not least, do not hesitate to ask for help – whether it is financial advice from a planner or monetary assistance from friends and family. You deserve it!

What are your ways to live on a fixed income? Share your ideas with us in comments!

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