Without a budget, even some of the savviest retirees and seniors live
with ongoing financial struggles. Creating and using a budget is vital to both preventing financial difficulties and maintaining or attaining financial security.
Calculate your monthly expenses
Budgeting consists of
• Determining your incomeand expenses
• Making necessary adjust-ments to your cost of living
• following your budget religiously.
One of the biggest problems in budgeting (aside from failing to follow it) is the failure to include all costs. It’s easy to forget to include expenses you don’t incur on a regular schedule, such as the full costs of vacations, clothing and entertainment.
Bills paid quarterly or annually, such as insurance or property taxes, may often be forgotten as well. Another error individuals make is the temptation to budget for the best-case scenario with fluctuating bills such as gas and electricity. Small day-to-day expenses are frequently overlooked. Brainstorm and create categories for all these types of expenses to make sure they are included in your budget.
Determine your monthly expenditures for bills that fluctuate from month-to-month by adding up the previous year’s bills. Add 5% to the
total for the past year to account for inflation. Then divide by 12 to arrive at a monthly average. For categories like gifts or
clothing, calculate what you spend in a full year. Then divide by 12 for
your average monthly spending.
Determine your monthly income
Determining your monthly income is simple if you receive the same amount each month in social security or pension payments. If you still work, just multiply your weekly take-home pay by 4.3 weeks since
there are nearly 4 1/2 weeks in a month.
The balancing act
To determine the difference between your monthly income and expenses, add up each column individually. Then subtract total expenses from total income. If you end up with a negative
number, you’ll need to cut costs. Place a checkmark next to each
expenditure that cannot be reduced. Next, from the items that don’t have a checkmark, determine which are unnecessary or don’t provide real value to your life, and begin cutting or reducing those amounts. Also, look into senior savings programs as well as local, state and
federal government benefits such as assistance or discount programs.
Determine how much you must spend to meet your needs. Then
continue cutting and reducing the expenses until your budget balances, or preferably, has a positive remainder each month to cover savings, emergencies and miscalculations.
Don’t Get Sidetracked
The final step in budgeting is to stick to it. To remain within your budget, track unfixed expenses such as vacations, entertainment and miscellaneous expenses.
When extra cash is floating around, the extra $100 or $1000 sitting in your bank account now will likely need to be available to cover another expense down the road, such as property taxes or car repairs. Attaining and maintaining financial security requires self-discipline to live within your means.
By setting up an accurate budget and sticking to it, you’ll not only avoid debt and financial hardship but also the stress that can accompany it. Without a budget, even some of the savviest retirees and seniors live with ongoing financial struggles. Creating and using a budget is vital to both preventing financial difficulties and maintaining or attaining financial security.
