…Living on a fixed income doesn’t necessarily relegate you to a life of scrimping and penny-pinching. Many retirees live on a fixed income of some kind, and it’s definitely possible to live well on a fixed income — the key is careful financial planning and budgeting.
Create a Budget
It all starts with getting a handle on your income and spending by creating a household budget.
- Start by writing down the amount of your monthly income…from all sources…
- Next, write down your fixed monthly expenses…such as your mortgage or rent, utilities, insurance, car payment, and groceries.
- Subtract your monthly fixed expenses from your monthly income to see how much (if any) money is left over for variable spending on everything else you need or want to buy.
Lower Expenses, Boost Income
If your budget doesn’t leave as much money as you’d like for discretionary spending on extras like entertainment, travel, and shopping, you have two options: lower your expenses or increase your income.
Here are… tips to help you accomplish this:
1. Lower your monthly housing costs
Your…mortgage is probably your largest monthly fixed expense, so saving money here could potentially have the biggest impact…
- Downsizing to a smaller home could save hundreds of dollars a month in…mortgage costs…homeowner’s insurance, property taxes and utilities.
- If you’ve got flexibility in where you live, you could possibly save even more by moving to a different part of the country where housing costs and tax burdens are lower.
2. Reconsider your transportation expenses
Transportation costs are the second-highest monthly fixed expense for many people. This is especially true for people who finance or lease cars and only drive them for a few years before trading them in for a new car.
The best way to cut transportation expenses is to:
- buy a used or late-model car in cash and keep it well-maintained. Not only will this eliminate a monthly car payment, which now exceeds $500 a month on average for a new car, but it will also lower car insurance premiums. Cars are also an asset that rapidly depreciates, so if you’re looking to find some extra discretionary income every month in retirement, driving a new luxury car might be something to reconsider.
3. Eliminate debt
Excessive debt is the biggest obstacle to living well on a fixed income for many people. Every dollar devoted to paying down debt is a dollar that isn’t available for discretionary spending.
- Credit cards tend to be the most common (and expensive) source of debt for many people living on a fixed income. If you’re carrying credit card debt, make it your mission to pay it off as soon as you realistically can and, once you’ve paid off all your credit card debt, resolve not to use credit cards again unless you can pay off the balance in full every month. This will eliminate credit card interest from your monthly budget.
4. Earn some side income
…Today’s “gig” economy offers numerous opportunities for earning extra income on the side.
- Tutoring, personal shopping, life coaching, event planning, and reselling items (such as on eBay, Craigslist or Etsy) are just a few ways you can increase your fixed income in order to have more spending…[money] and live better.
Our Take: Live the Life You Want
Oftentimes, we also hear that people are “living on a fixed income” when in reality they have other potential income sources, they just don’t want to touch them. Sometimes it’s because they’re afraid of a market drawdown and want to have the comfort of having something stashed away that they don’t touch, and sometimes it’s because they want to leave something to their families when they’re gone. But whatever your situation might be,
The most important thing in retirement is living the life you want for yourself – you worked hard for it! – so if you have to tap into some other stash you’d set aside, downsize, or find a side gig, go ahead and do it….
If you need some additional help to make sure you live the life you always wanted to live, check out the Lottie retirement guide.
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Editor’s Note: The above excerpts are from the original article , and have been re-formatted, color highlighted, edited ([ ])* and abridged (…) by Lorimer Wilson, editor of munKNEE.com – Your KEY To Making Money! – for the sake of clarity, and brevity to provide a fast and easy read.
*(The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)