I was 24 years old when I married my wife in 1974. The average price of a new home was $34,900 and the average median family income was $12,836, according to government data. At the time I was a restaurant manager in Florida and brought home $269 every other week and we had a strict budget to make ends meet and cover monthly expenses.
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Fast forward 39 years and it’s incredible how much prices have risen and the economy has changed. The national median price for existing homes was $180,000 in December 2012, according to the National Association of Realtors and the average median household income was $50,054 in 2011, according to the Census Bureau.
No matter how much has changed over the decades, basic personal finance principles hold steady: a well-formed and adhered to budget will lead to greater savings and a financially-sound retirement.
Baby boomers navigating their way through retirement planning are finding new obstacles that their parents and grandparents didn’t face: we are living longer, pensions are antiquated and the financial crisis wiped out much of our retirement plans. All these factors mean boomers have to be more diligent in our budget creating and savings and need to stay in control of your life and adjust to living on a fixed income.
Boomers in, nearing or planning for retirement need to stay within their budget and always be looking look for ways to reduce spending to help shore up their savings. Rent.com recently surveyed 1,000 U.S. renters and found that 74% of respondents follow a budget, while 61% spend more than they take in each month.
Overspending is easy, but it can be detrimental to boomers living off a fixed-income in retirement. Kari Taylor, director of renter insights for Rent.com, offered boomers the following five tips to help curtail overspending and to effectively reduce their expenses:
1) Create a Budget. This is the most important step for retired boomers to keep themselves on a steady financial track. According to a survey of renters by Rent.com, almost 30% of renters 65+ don’t follow a monthly budget so it’s easy for them to end up in sticky financial situations. Take a month to review all spending habits and create categories, such as food, housing, entertainment, etc. to see how you are spending money and then make adjustments accordingly.
2) Shop Smart. The Rent.com survey also found that 58% of 65+ renters say rising costs make it difficult for them to save. There are a few ways to manage those costs, such as: buying common household items in bulk, keeping an eye out for coupons, or shopping store brands on items that you don’t value as a premium purchases (e.g., paper towels). Seniors who don’t necessarily want to store bulk buys can also go in with friends and split the cost of a large bulk purchase to both save money, and space.
3) Manage your Meds. Always have a conversation with your doctor before changing any medical routine or medication, but it can be worthwhile to review what generic medications are available. Generic medications can offer serious savings without sacrificing treatment. Boomers shouldn’t be afraid to shop around, medicine prices aren’t the same at every store. Check with AARP for more hints and tips on ways to save with doctors and providers.
4) Create Efficiencies at Home. Rent.com found that 67% of 65+ renters cited monthly rent payments as the biggest monthly budget eater so plan to off-set those costs by lowering other household costs such as electricity, water, phone, etc. See if your family wants to do a family cell phone plan to share the savings (this will often make keeping in touch with each other free as well!). Talk to your utilities company: often prices can be negotiated and there might even be a senior citizens discount that is applicable to your situation. Be mindful that energy costs can add up quickly and take simple steps to reduce your use by always shutting off lights, setting the thermostat on a slightly lower level in the winter and wearing a sweater and not bumping up the air conditioning in the summer.
5) Evaluate your Entertainment. Retirees often find themselves looking for ways to fill their schedules. Unfortunately, entertainment costs can stack up quickly – travel, food, movies, treating family members, etc. There are certain non-negotiables, but there are often alternatives to help off-set those costs you don’t want to compromise on. Check out Skype as an easy and cheap way to see family on a more regular basis; host a movie/game night at home with friends where everyone brings a pot-luck dinner and shares in the costs; see movies early in the day – often theatres show movies at up to half off before noon.