2024 has arrived. The new year has officially begun. On the financial front, tough times await seniors. Although seniors will receive better Social Security checks in 2024, that is not enough to cover all the costs. Thanks to inflation and high cost of living.
So, what’s the way out? Smart budgeting and money management can help seniors to overcome this financial crisis.
Why Should Seniors Follow A Budget In 2024?
Although there will be a 3.2% hike in social security payments in 2024, seniors will still be in financial trouble.
Here are some possible reasons:
Higher cost of living:
According to USA Today, 65% of seniors admitted their living expenses are 10.5% more than a year before.
Loss of benefits:
Many seniors (low-income groups) have lost access to financial assistance programs in the last year. The 8.7% COLA in 2023 and 5.9% COLA in 2022 pulled many seniors out of poverty. As such, they became ineligible for several assistance programs, such as rental assistance programs and SNAP. So, their out-of-pocket expenses have increased significantly.
Seniors may also have to pay more tax in 2024. This is because of the extra money they received from the Social Security checks.
How seniors can stick to a budget in 2024
One of the best ways to master the art of money management is to set up a budget. For seniors, it is a must. Basic money management skills help seniors stay financially independent for a long time. When you live on a fixed income, your resources are limited. You have to manage everything with that amount. A budget can help you to do that.
Follow The 70/30 Rule:
This is a simple budgeting rule where seniors use 70% of their income for their necessary expenses. They save the remaining 30%.
It is not easy to save money on a fixed income. But it is possible. You must prioritize your expenses for essentials like healthcare, utilities, housing, etc. Allocate 70% of the budget to essential items.
Create a budget:
Monthly expenses include housing, utilities, insurance, groceries, healthcare, and entertainment. Categorize expenditures into fixed (e.g., mortgage) and variable (e.g., dining out) to identify areas for potential savings.
Evaluate retirement income:
Evaluate all income sources. This includes pensions, Social Security, investments, and part-time jobs. Consider changes in income, such as adjustments in Social Security benefits or new investments.
Explore senior discounts:
Take advantage of senior discounts for various services, like transportation, dining, and entertainment. Most of the time, you must ask if a deal exists for seniors. You might be shocked in a good way! Stay informed about special senior days or promotions offered by businesses.
Review your insurance policies:
Regularly review your health, home, and auto insurance policies. Do they meet your current needs? You can purchase home and auto insurance policies from the same company to save money if required. Explore bundling insurance policies for potential cost savings.
Consider downsizing:
Look at your present living expenses. Is it eating up your budget? Can you save a single penny at the end of the month? If the answer to the first question is “yes’ and the second one is “no,’ it’s time to downsize. You can move to a smaller apartment or a cost-effective area where you can lead a comfortable lifestyle.
Do your research before you move to a new place. Take a trip or two to see what living there is like. Think about the cost of living, which includes food, utilities, medical expenses, and the cost of living.
Think about the quality of life, which includes things like the weather and the number of fun things you can do. If you want to move there, talk to people who live nearby about what they like and don’t like about the retirement community.
Also, start getting rid of stuff and packing boxes at any time. Choose what to keep, give away, sell, or throw away. Is this too much for you? It might help to have a trusted family member or friend with you as you go through your home.
Don’t spend as much now. Start cutting back on spending as soon as you can if you can. This might help you get used to living in a cheaper place when you move.
Utilize preventive healthcare services:
Preventive healthcare helps you lead a fulfilling and long life. It helps to diagnose medical issues early on and avoid acute health problems later on. So, if you want to avoid long-term medical expenses, use free or budget-friendly preventive healthcare services.
You can also join wellness programs for affordable healthcare. Visit community health clinics to get medical treatment at a price you can afford.
Pay off your debts:
The Federal Reserve has quickly raised interest rates to keep inflation in check. That has made it much more expensive for families to borrow money for mortgages, car loans, school loans, and credit card debt.
For example, the average APR (annual percentage rate) for credit cards is over 20%, the highest it has ever been.
Use any extra money to pay off your debt. Most financial experts say that you should pay off your highest-interest debt first and try to pay all your bills on time every month if possible.
There are several ways to pay off high-interest debts.
Here are some of them.
Enroll in debt management plan:
If one of your financial goals is to eliminate high-interest debt, you can try debt management. Credit counselors offer tips for saving money and attaining financial security in a debt management plan. They analyze your financial situation and spending habits.
After that, they formulate a budget plan per your financial goals to help you save money and gradually pay off your debts. They negotiate with creditors to reduce your interest rate and arrange an affordable repayment plan.
Once you start working on the repayment plan, you can send payments to the debt management company. The credit counselors will forward your monthly payments to your creditors per the new agreement. This debt relief option works best when you can follow a budget and not incur fresh debt.
Pay more than the minimum amount:
Please pay more than the minimum amount due on your credit card. If you only make the minimum payment on your credit card bills, you will get some of your debt paid off, but you will probably pay more in interest over time. Your overall debt amount will increase due to the compounding high-interest rate. Paying more than the minimum amount may help you make a big hole in your debt.
Follow the debt avalanche method:
The debt avalanche method is a great way to pay off debt with a high-interest rate. First, put your debts in order of interest rate, and pay off the one with the biggest interest rate first. Then, move on to the bill with the next-highest interest rate, and so on.
However, ensure you keep up with your payments on your other credit accounts. The less interest you pay over time, the more money you will save and get financial success.
Opt for a reverse mortgage:
A reverse mortgage is an excellent option to convert your home equity into income without losing your property. The best part is that you don’t have to make monthly payments. You don’t even have to pay tax on the income. So, if you are 62 years old or above and plan to stay in your home for a long time, apply for a reverse mortgage in 2024.
Get rid of-pocket costs and our rules:
Things can change, and your plans and benefits might not work anymore. After making a choice, it’s easy to forget about it. If you do that, you might miss out on money.
Get together the things you need to pay for, like extra health insurance, covering for prescription drugs, life insurance, and long-term care insurance. Check to see if you have the best rates or cost-effective plan(s). Get a friend, family member, or professional who knows what they’re talking about to help you think about your options before you make any changes.
Explore Medicare Savings Programs
You might get an extra $100 a month from Social Security. Also, your rates and co-pays might go down. Check out Medicare Savings Programs to see if you can get help. Medicare Savings Programs (MSPs) help people with limited incomes to cover Medicare premiums. There are eligibility criteria for income and resources. However, the state laws can modify the financial guidelines in some instances.
Look for ways to reduce property taxes:
Home prices are increasing nationwide, and new assessments can hurt your wallet. Residents of many states who are 65 or older don’t have to pay property taxes. This could save you hundreds of dollars a year.
Be aware of the healthcare costs:
With rising healthcare expenses, staying informed about Medicare, supplemental insurance, and prescription plans is crucial. Regularly review healthcare coverage to make necessary adjustments based on changing needs.
Update your estate plan and will:
Update your wills and estate plans as per your current assets. This ensures a smooth transition of assets to heirs. You can minimize your financial and emotional burden on your loved ones.
Diversify your investment portfolio:
Revisit your investment portfolios. Keeping a mix of stocks, bonds, and other investment vehicles can help manage risk and optimize returns. Consult with a financial advisor to diversify your investment portfolio. They can help you align investments with individual risk tolerance and financial goals.
Cook meals on a budget:
Once you turn 60, your primary focus shifts to your health and finances. You can’t lead a reckless life anymore. You have to embrace healthy eating habits, and that too on a budget. Late-night dinners at an expensive restaurant are a big “no.’
Plan meals in advance to minimize waste. Buy in bulk and take advantage of sales. Explore affordable and healthy recipes.
Be cautious about scams:
Financial scams are rampant in the country. And if you look at the stats, you’ll find that seniors are the easiest victims of financial scams. According to the FTC, individuals aged between 60 and 69 years have lost almost $836 billion due to financial scams. So, if you want to stay ahead of the game, beware of the common financial scams. For example, imposter scams, romance scams, tech support scams, etc.
Stay alert. Be suspicious of the calls where you are pressured to make payments over the phone.
Be prepared for a financial emergency:
We don’t know what’s in store for you in 2024. While it’s good to hope for the best, it’s best to hope for the worst. Try to build an emergency fund that lasts for months at least. As a retiree, it is difficult to set aside money every month for your emergency fund.
But if you consciously cut down all the discretionary expenses and save 10% of your income, you may be able to build an emergency fund. In that case, you can open a high-yield savings account where you can deposit a specific amount every month.
Why is it difficult for seniors to thrive on a budget in 2024?
The cost of living is going up so fast that even the smartest seniors can barely get by these days, mainly if they depend on a set monthly income. For example, look at these numbers.
UMass Boston’s Elder Index determines how much money older people need to live independently. Its interactive modeling tool says that a senior citizen in excellent health who lives in the Washington, D.C. area and pays a mortgage needs $3,665 a month to meet their basic needs.
Many older people have very little money left over after paying their bills, even if they have other sources of income.
Conclusion
If you want to be financially strong in 2024, follow the financial tips. Create a budget, pay off debts, get enough insurance coverage, downsize if required, diversify your investment portfolio, and opt for reverse mortgages. Once you master the art of money management, you can focus on the other essential aspects of your life. Your financial life will shine like the sun.
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