Living on a Fixed Income

by | Mar 28, 2016 | Quick Tips, Retirement

New retirees enter into a period of life where they will live on a fixed income, which is often less than their income has been in years. The average social security benefit is $1,294 a month, and according to the Social Security Administration, Social Security benefits are often the primary source of income for Americans 65 and older. However, the expenses for an average American 65 and older exceeds the average Social Security benefits, in some cases by as much as $1,000 a month.

How are you going to be able to afford living on a fixed income?
Here are six changes to make in your retired life to keep you happy, healthy and on-budget:


Become a Budgeter:

If you didn’t need to carefully manage a budget and track spending before retirement, now is the time to start. Especially early on, you will need to get yourself adjusted to how far your fixed income will go. Keep meticulous records of how much you are spending in areas of housing costs, transportation costs, entertainment, groceries, eating out and shopping. There are apps for your phone that will help you keep track, or you can use good old fashioned paper and pencil.

If, at the end of your first couple months, you realize that you are spending a disproportionate amount of your monthly income on eating out or shopping, then these are habits you will need to adjust. Budgeting can also be helpful if you try to live under your means, which would leave you a small amount of extra emergency money each month in case an unexpected cost comes your way.

Minimize housing payments:

In general, your housing payments in retirement should range from one-third to one-half of your monthly income, but eliminating them as much as possible will free up money for other things. Try to pay off as much of your mortgage as possible before retiring to minimize the monthly payments you will owe once you are on a fixed income. A reverse mortgage could be used to pay off an existing mortgage, while increase your monthly income.

If you choose to move somewhere new in retirement, MarketWatch recommends renting rather buying to keep your savings freed up. Another recommendation about moving to a new location is to only purchase a home that you can afford from the proceeds of selling your previous home. This might mean downsizing, but it also might mean no mortgage payments. Finally, if you are moving, consider moving somewhere with lower taxes to reduce how much you will owe the government.

Cook at Home:

Eating out is a quick way to rack up hefty bills. It is much easier to budget how much you will spend on food each month when you shop at a grocery store and cook your own meals. Not to mention, cooking at home allows you to use fresh, healthier ingredients, which are better for your health. Avoiding restaurant meals that are often high in sugar, calories, fat and sodium reduces your risk for diabetes, obesity and heart problems. Staying healthy is important when you’re living on a fixed income because medical bills can be extremely expensive. Cooking at home is the best solution to keeping yourself healthy and saving yourself money in the short-run and long-run. Keep in mind that Medical costs rank among the top three retiree expenses, after housing and transportation, according to the Social Security Administration.

If you want to get extra thrifty with cooking at home, meal planning can be a fantastic way to save even more by paying attention to deals at your grocery store and only buying exactly what you need.

As a general rule of thumb, you should not need to spend more than a couple hundred dollars a month on food and drinks.

Eliminate as many cars as possible:

Cars undeniably suck money down the drain. Between payments, maintenance, repairs, gas and insurance, a car costs a lot to keep. If you and your spouse currently have two or more cars, consider reducing the number to one. Becoming a one-car couple can be a very financially smart decision when living on a fixed income. Carpooling with each other and with friends or family is a simple solution to still get where you need to go, while saving hundreds of dollars a month.

If you are really committed to reducing your monthly expenses as much as possible, get rid of yours cars all together and embrace public-transportation. The option to be completely car-free will probably vary greatly upon where you live. Public transportation systems are not as efficient or user friendly everywhere in the country, so take this into serious consideration before getting rid of all your cars.

Avoid adding new debt:

According to Super Money, avoiding new debt is key to financial success on a fixed income. This especially applies to impulse buys for big, fancy items that may not be necessary. Blowing your budget one month and adding new debts can have lasting impacts in the months to come.

Find free entertainment:

Familiarize yourself with the programs and activities offered at your local senior center. There are likely to be free (or very low cost) options to have fun and socialize. Also keep up with activities in your local community such as outdoor concerts and festivals that would be free to attend. Some zoos, botanical gardens and museums may even also offer senior days, where senior citizens can get free admission. You can always call to ask if a specific location offers discount days or free days for seniors.

Don’t forget the simple joys of being outside as well. Going for walks and bike rides can get your out of the house and improve your health! Consider packing a picnic lunch and eating at a local park. Maybe you could spend the afternoon fishing at a nearby pond.

Volunteering is also a free way to get involved in your community, keep busy and make a difference. If there are causes you are passionate about, look for organizations in your area that relate to that cause and find out if they need help.

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