Budgeting goes hand-in-hand with retirement planning. But we often run into unexpected costs and lifestyle choices that put a healthy retirement savings at risk. Here are a few things to keep in mind when you're on a fixed income so that you stay on budget and live within your means.
1. Fixed income versus a rising cost of living
When we retire, we typically have a set budget based on our savings, what we can afford, and what we know we need to spend on bills. However, the rising cost of common household goods, groceries, or utilities are variables that are not always easy to account for, resulting in a difficult to track budget. One of the ways we can account for variables like inflation or fluctuating gas prices is to include a line item in our retirement and financial planning that accounts for these varying costs. With a little bit of planning, you can protect your budget from unexpected cost of living increases.
2. Unexpected medical bills
It's no secret that as we get older, we tend to need more medical care. A sudden accident, an unexpected illness, even a costly prescription can wreak havoc on a budget. There's no easy way to plan for unexpected office or ER visits, but you can arm yourself with these quick tips for dealing with bills.
- Review your bill carefully – it's said that as many as 8 out of 10 hospital bills contain mistakes. Make sure yours doesn't. If you didn't get an itemized bill, ask for one. This should help you see if you're being billed the right amount.
- Get an advanced estimate for any unexpected medical procedures. If the final bill goes over the estimate, ask why and advocate for the initial lower amount.
- Ask for a payment plan or financial aid options – most medical practices and hospitals offer payment plans and can help you find a financial aid program that will work for your budget.
3. Living beyond your means
It's easy to forget you have a budget when you're on vacation or it's the holidays, but unchecked spending can quickly become a habit – especially if you're using a credit card. An easy way to curb passive spending is to only purchase things with cash. From coffee to groceries, when you see your money leave your hands, it is a reminder that you only have a finite amount. One way to rethink living within your means is to not think of it as depriving yourself, but as a way to live without the stress of worrying about money.
4. Being too generous with family members
It's natural to want to help family members, whether it's helping pay for a grandchild's college education, or helping an adult child out of a sticky financial situation. However, without careful planning and an agreed upon, even binding, repayment contract, it can result in family members taking advantage of aging relatives. Being generous is a wonderful thing, as long as you know you can afford it. Get an outside perspective involved before lending or investing in anything and contact your financial advisor.
5. Failing to plan properly for retirement
When it comes to retirement, it can be hard to think about what happens when you or your loved one can no longer live independently. Assisted living can be costly. Talk to your insurance provider about life insurance or long-term care insurance options to help find the most cost-effective solution.
If you are looking for more information on saving for retirement, contact one of our Personal Bankers today.