More than 25 million seniors are economically insecure. That number may soon increase as more Baby Boomers retire. Sixty-seven percent of Americans believe they will outlive their retirement savings, and 21 percent have saved nothing at all.
Whether you’re just struggling to get by, have a large nest egg that you can’t possibly spend, or fall somewhere in between, better money management can improve your life—and possibly the lives of those you love. With the right money management strategy, you can leave behind a legacy to your loved ones or to a charity, afford exceptional living, and spend your retirement relaxing instead of stressing. Here are the most important money management tips for senior citizens.
Get Expert Advice
Money issues can feel overwhelming. They also often come with a hefty dose of shame, especially if you don't have enough money or have spending habits you know you should break. Often, the seniors who need help the most are also those who are most reluctant to seek it. They worry that they’ll hear nothing but bad news, or that they don’t have enough money to invest or to plan with.
If you think you don’t have enough money, you need expert advice. Even if you think you’ve got plenty of money to spare, expert advice can help you ensure that’s true while you plan for your long-term future. Every senior needs to schedule an annual conversation with a trusted financial advisor. Choose someone who works for you—not someone who is paid on a commission to sell a product.
If you’re in debt, consider seeking expert advice to get out. Debt burns through your money faster than anything, and debt interest payments will accrue much faster than interest on any savings account. Contact the National Association of Certified Credit Counselors for help repaying your debt and better managing your money.
Get Help With Daily Money Management
Keeping track of financial documents is key to your financial health. Healthcare expenses, for example, may render you eligible for a tax deduction, and keeping track of paid and unpaid bills can protect you from double billing and predatory billing practices. A late payment can lead to a cascade of fees, and regular monitoring of your credit card and bank statements can protect you from scams and other disasters.
Many seniors find the challenges of daily money management overwhelming, confusing, and frustrating. These tasks can take you away from time with your family. If you have dementia or a cognitive impairment, you may worry about your ability to do these tasks correctly. Some strategies that can help include:
- Setting up online banking.
- Scheduling a monthly bill pay time.
- Automating as many payments as you can.
- Getting assistance from a money manager who can help with the complexities of daily money management.
- Reducing the number of bills you have. Senior living merges multiple bills into one, giving you fewer expenses to monitor.
Understand Your Emotional Relationship to Money
Money management blogs are filled with tips about cutting expenses and saving more. It might seem obvious and simple, but if it were, you probably would already have implemented these tips. For many people, their relationship with money is every bit as complex as their family relationships.
Before you are able to make meaningful changes to the way you handle your money, you must first untangle your emotional relationship to your finances. Some people spend freely because they don’t think they’ll be able to save enough money anyway. Others see money management as a way to control their lives. Understanding your own unhealthy financial habits can help you get them under control. It may even be worth it to spend a few sessions with a therapist, especially if you continue to make the same damaging money mistakes.
Plan for the Future
What would happen if you were no longer able to manage your own money? Whom do you trust to manage your money on your behalf? What about if you die? Where should your money go, and should there be any strings attached to the money you leave behind?
An estate or elder care lawyer can help you plan for your financial future, no matter what it holds. They can also help you draft documents such as a power of attorney and an advanced healthcare directive. For help finding a qualified attorney in your area, contact the National Academy of Elder Law Attorneys.
Talk to Your Loved Ones
No matter what your plans are for the future, talking to the people you love the most about those plans can ensure your dreams become a reality. Don’t make assumptions such as that your child will take you in or your grandchild will understand if you don’t leave them anything in your will.
Spend some time discussing the future on a regular basis. Not only does this help you clarify your goals, but it also makes the future feel less frightening. You may even find that your loved ones are more empathetic than you anticipated and willing to offer much more help than you thought they would. Information is power. So share that power with your family or friends.
Cut Needless Expenses
Small expenses can add up over time, especially over decades. So if you can cut out daily unnecessary expenditures and invest the money instead, you may soon find yourself a bit wealthier. Some expenses to look at include:
- Memberships you never use or never signed up for.
- Eating out or getting coffee at a shop.
- Buying name brand products instead of generic.
- Impulse purchases that you never use.
- Not returning things you dislike because it’s too much of a hassle.
Consider also contacting your utility companies to ask about more competitive rates. Many are willing to offer a lower rate if you say you’re considering leaving. Taking advantage of senior citizen discounts and buying days can also help you cut expenses, so check for discounts in your area, and don’t shy away from asking your favorite store or service provider if they have a senior rate.
Regularly Reevaluate Your Plan
A plan is unlikely to serve you well if it can’t be flexible and adapt to changing circumstances. Put your long-term financial plans in writing, then break each goal down into actionable steps that allow you to measure results. For example, you might resolve to pay off $1,000 of debt in six months. Then commit to reevaluating your plan on a regular basis—at least yearly, but quarterly or more is even better.
Get Tax Help
Seniors are eligible for a wide range of tax benefits. Some states do not tax Social Security. Others offer property tax breaks or large standard deductions for seniors. If you work part-time, you may be able to deduct work-related expenses and other costs of doing business.
Charitable donations are deductible, as are many other common senior expenses. You may also be eligible for a wide range of tax credits that apply even if you earn no income. So before writing a check to the IRS, get help from an accountant. You’ll save money, and you may even get a big refund that you can invest in a better retirement.
It’s easy to make decisions by inertia—living where you do because that’s what you’ve always done, shopping at certain stores because they feel comfortable, patronizing the same providers not because you like them but because you don’t have time to make a switch.
Don’t default to doing nothing. Instead, consider whether downsizing your lifestyle and your home might make sense. Odds are good that you don’t need as much space as you once did. Is your home bringing you joy? Or is it a chronic source of stress and expenses?
If you’re ready to downsize, selling your home can offer you a significant nest egg. Moreover, you might be able to save even more money—and live more luxuriously—by transitioning to senior living. Senior communities offer luxury dining, lots of activities, beautiful homes, and help when you need it. The price tag is often more affordable than that of home ownership, and you can use the proceeds from a home sale to fund senior living.