Tuesday, May 14, 2019

How to Live Within Your Means

     After we retire, we no longer get a paycheck. We knew it was going to happen, but knowing it and experiencing it are two different things.

     If you are struggling to live within your budget I've got a few suggestions that might help bring your retirement expenses into line with a more modest retirement income. (And if you have any other ideas, I'd love to hear them.)

     The most important thing, I believe, is to economize on legacy goods and services -- things you're paying for that you don't really care about anymore. For example, maybe you're still paying for a membership to a swim-and-tennis club that your kids used to use, or a gym membership that you intended to use but never did. Or, if you're like me and have remarried, you can consolidate a lot of bills -- like insurance, phone, AAA membership -- to help your monthly budget.

     Maybe you don't go to the big box store anymore, where you drop $250, and now that the kids are gone you end up throwing away half of your "bargain" purchases. And, do you really need life insurance if you don't have any dependents anymore?

     If all this seems like small potatoes, remember, one small change may not make much of a difference, but add them all up and you might be talking real money.

     I know from my own experience that if you downsize, you can sell some of the things you no longer use. Before we moved, I made about $200 when I carted several boxes of "leftovers" from our basement to the local picker's store. I could have made more if we had thought ahead and joined the neighborhood tag sale.

     Other people may have bigger fish to fry. Do you still have that old boat you bought when your kids were teenagers? Do you have an extra car that's rusting away in the driveway, or a vacation condo or time share you hardly ever use anymore? Even if your unwanted items have greatly depreciated, it's still better to have the money now rather than the headache of getting rid of it later on.

     Also, as we enter retirement we should be paying down debt not taking out more loans. There will be no more salary increases to cover those additional monthly payments. The credit card is the worst (do we all pay off in full at the end of the month?) since interest rates are high and penalties lurk around every corner. If you are running a balance, don't hesitate to call your credit company to try to negotiate a better rate. Sometimes it works!

     But we shouldn't worry too much if we're carrying a mortgage into retirement. That is the last debt to pay off. But trust me, there's no better feeling of security than living in a home that's free and clear of the bank.

     I'm not going to try to tell you how to save money when you're traveling, because I'm no expert. I don't travel that much. (But come to think of it, it's certainly one way to afford retirement -- cut down on the travel budget!)

     But I will mention something else. It's something I see all the time: Retired people still buying things for their grownup kids, or sending them a check a couple of times a year. But there's no law that says you have to subsidize their rent or pony up a down payment on a car or house. Remember the old saying about roots and wings. You gave your kids roots. Now it's time to give them wings, and let them fly on their own.

     I got this last idea at a retirement seminar I attended -- not a practical tip, but more of an attitude adjustment. One fellow stood up and told us that he retired from IBM about three years ago. He used to run a department and have people reporting to him, and he had a pretty good salary and some stock options and he wasn't shy about spending his money on a big house and three cars and a yearly trip to Europe.

     After he retired he felt like he had no purpose in life. Then he realized he had defined himself by his job -- he was an IBMer -- and in some sense he "kept score" of his life by how much money he made and how many people reported to him. Now he didn't have that anymore. He had to come up with a different way to define himself and a different way to keep score.

     Now he volunteers with Habitat for Humanity and also at the local senior center. He sold his house and moved into a condominium, and he doesn't travel much anymore. Why? Because now he defines himself as a volunteer rather than an IBMer, and he keeps score not by how much money he makes, or by how much stuff he buys, but by how many people he has helped.

     He doesn't make nearly as much money, and doesn't spend as much either. But he enjoys a closer relationship with his community. And he feels less stressed, more relaxed, and in his heart he is much happier.


Terra said...

I like the story of the guy who used to define himself by his job and now defines himself as a volunteer. I am surprised by how many retirees do not volunteer; it is very satisfying. When we retired my husband and I dropped our cable TV (it cost about $100 a month for basic) and changed to a few streaming subscriptions like Britbox, AcornTV, Hulu, etc. which saves $70 a month.

Juhli said...

Great post! I do want to add that another potential financial drain to consider is housing. A smaller home in the same area will cut all associated housing costs (insurance, utilities, upkeep, property taxes) and one can always rent space for visitors for a lot less than maintaining a large property.

Barbara said...

I fell into the group that gave too much money to their children. I knew better but it was hard to stop. I also miscalculated how far my money would go each month. I would have been comfortable when I retired but I did not take into account that the cost of food and medicine would triple.

gigi-hawaii said...

Well, I will never sell my house and move to a care home or retirement facility. It costs so little to live in my house. I intend to age in place and have the caregiver or nurse come to my house instead of going to them.

DJan said...

My husband and I have no living dependents, so we live on a comfortable monthly income from SS and annuities. We are careful not to take on any new debt and enjoy not having to count pennies. :-)

Tom said...

Well, housing for sure. We moved and downsized and are saving at least $1,000 a month. So that leaves me with the funds to (gulp ... confession time!) send birthday and Christmas checks to the kids.

Shivi Choudhary said...


Janette said...

Great discussion piece Tom.
We do overspend on kids and grands. I am not sure how to stop that train- but I am minimizing it. I thought. "I will start giving more time." Guess what 10 days with three kids is WAY too much for me.
What to do?
At 62 and 69 we are on a three year plan to move back out west here we both are from. We will invest in land this year and build a couple friendly//age in place house in the following two years. Our property taxes will go up, but the house will be smaller and easier to care for. It will be in an area that is easier to get help.
We have been generous in our retirement. We have also been able to save about a fifth of what my husband brings in. Still, we have to be more aware. If he should pass before me, my income will drop to 1/3 of what we have now. THAT is where our savings will have to step up and move me forward.

Diane Dahli said...

I love that you have given your readers a platform to discuss this very important topic. Research shows that many older people struggle with making ends meet well into their retirement. I think the two greatest expenses are housing and giving too much to grown children. Both can be addressed, but people need to be realistic and courageous. It takes careful thought to change your residence when you retire, but well worth it to downsize. As for 'helping' those you love—that's tough, but has to be addressed. Thanks, Tom, for a great post!

Anonymous said...

My sister in law and brother in law moved far away from their kids and grandkids to have some time and enjoyment..But the city they live in does not have a hospital at all it is many miles from where they live now..I would never do that because of my health kidney problems type 2 diabetes..Our only is not married no kids and no plans to have kids..lives in NYC and travels the world, we see her as much as we possibly can..We give gift cards as she can choose what she likes better than what we choose..We see many who had huge families all grown up now and still struggling, many get divorced and are really suffering, we don't understand, married 45 years at the end of May, we think why did they stay in loveless and lonely and sometimes crazy marriages for over 40 plus years??? Divorce is quite acceptable these days, one only lives one time as I recall, love your blog happy summer to you and your sweet wife tooo!!!!!!!

Anonymous said...

What about getting a job? They need greeters at Walmart - and you will get to see your friends regularly!

Wisewebwoman said...

I don't count the people I help, truly. I have been approached years later by some and told how much I helped them and frankly, I can't remember until they go into great detail. I am so glad of that.

I have a very slim budget but manage and am grateful and take wee jobs to buy wee gifts for family and friends or make them something. My only indulgence would be craftish supplies. And I do sell some of those too. Nothing like selling a piece of one's own art.

My days are my own, my greatest gift. There are never enough hours or enough days.


Anonymous said...

" They need greeters at Walmart -" Walmart's getting rid of that job, replacing it w/the job of "host" which is more physically demanding, including being able to lift 25 lbs--and not just a few times/shift. https://www.kdrv.com/content/news/Walmart-is-Getting-Rid-of-Greeters-Worrying-the-Disabled-506454361.html
Unless you are still in pretty good physical shape and/or have some specific & needed skills, it may not be too easy to find work.

Suggestions for cutting expenses are good, although dealing w/cancer treatments, etc., can drain savings. Best of luck to all.

David @iretiredyoung said...

Hi Tom, I've put a couple of links to some posts I did about saving money/cutting down on costs (I hope that's OK, but please feel free to remove if not).

When I first retired, I went through our costs and managed to:

1. Save $6,305 a year on relatively small things, as you say, they add up.

2. By going from a 2 car to a 1 car family, we saved another $5,500 a year which brought the total savings to $11,805. That's huge.

I knew I could reduce my costs, but it's sometimes surprising how much we pay out that really is not giving us much in return.



Kay said...

Your blog is so full of very helpful advice. My husband and I are lucky in that he does have a military retirement and I get a retirement from teaching in Illinois. I worry for my children though.