Going from your full-time job as an expat teacher, overseas missionary, and so on to a retirement income can be an adjustment. Fixed incomes are, by definition, the same every month — or pretty close to it. However, that doesn’t mean you can’t enjoy your golden years with a strong sense of financial stability. With that in mind, here are some ways you can make a fixed income work for you.
Build a Budget
No matter how much you have coming in each month, it’s important to have a complete understanding of how your money comes and goes. If you haven’t built a budget, start now.
Your first step should simply be making note of how you’re spending. Put each transaction into categories to get a sense of how much you spend on groceries, transportation, entertainment, etc. If you’re a US citizen located outside of the country, make sure to take conversion rates into account. Don’t get too shocked if a category is higher than you expected — simply make a note. It’s tempting to rush into making a lot of changes all at once, but resist that urge. Impulsive changes will be harder to sustain than those based on proper observation and reflection.
Once you have a sense of how much you spend, you can figure out what changes to make. Ensure that your monthly spending goals stay below your monthly income. If you can manage it, leave as much margin as possible so you can continue saving for the future. It’s impossible to know what kinds of expenses are around the corner, so the more prepared you are, the better.
Respect Your Limits
Once you have monthly spending limits in mind, stick with them. When you’re on a fixed income, it’s more important than ever to stay within your budget and avoid spending above your means. Track every expense throughout the month, and once you’ve capped out a category, don’t spend more in that category unless you absolutely cannot avoid it.
This doesn’t have to mean avoiding the store or giving up your favorite coffee shop, but it may mean opting for lower-cost versions of necessary items, or only getting that excellent latte every other day. When it comes to sticking to a fixed income, moderation is the name of the game.
There may be some parts of your budget that feel unchangeable, but actually, you probably have more wiggle room than you’d expect. Take transportation costs, for example: If you live in a dense neighborhood close to your favorite haunts, try to walk more than you drive. Not only will this cut back on your gas costs, but it will also provide sunshine and exercise — both of which have been shown to improve mood.
Your car insurance is another opportunity to save. You have to have the minimum coverage required by your state or country, but beyond that, it’s up to you. Even if you prefer the peace of mind full coverage brings, you may still be able to get discounts. For example, many companies provide savings for something as simple as being a safe driver, installing an anti-theft device in your car, and combining your auto insurance with another policy they provide.
So, speak with your insurance company and others to get the best sense of what kind of discounts and rates you could receive. Comparing companies will allow you to see if you’re not getting the best available deal, saving you hundreds of dollars each year.
Other recurring costs and services such as cable, internet service, or house cleaning may also feature unexpected ways to reduce spending. Investigate everything to see if there are any discounts or opportunities to cut costs in these areas.
Save for Tomorrow
Remember that the ultimate goal of tracking and reducing spending should be finding ways to save as much as possible. Even if you are very low income, try to save at least $500 to have available in the event of an emergency. In fact, if you are retired overseas, that $500 amount may need to be increased to allow for extra travel costs in case of an emergency. Keep adding to your emergency fund from there, and you’re less likely to be in serious trouble in the event of a costly surprise.
By tracking your costs, keeping spending low, and making extra where you can, you can create a stable lifestyle on a fixed income. All you have to do is create a plan — and then stick to it!
Guest poster Karen Weeks of elderwellness.net.