Many retirees are having difficulty with money management and are having money worries. They are finding it hard to adjust to living on a small pension when they retire.
However, making adjustments to your lifestyles and spending habits can help reduce your money worries and enable you to live more comfortably on a small retirement income.
Listed below are 7 money management tips on how to live within your means on a small pension.
- Prioritize your monthly expenses. Make a list of all your monthly expenses. This may take some time as you need to include as much detail as possible. Use a spreadsheet or a 4 column analysis paper to record:
- your itemized expenses in column 1,
- the amount spent in column 2,
- in column 3, write "need" next to the items you need to spend in order to survive (food, basic essentials, etc), or "want" against item of expenses that are not essentials (vacation, eating out, entertainment, etc ) and
- in column 4 prioritize your expenses after you have listed all your monthly expenses.
After you have done this exercise you will know how much money you need to spend each month in order to survive. The rest of the expenses are not essentials and can be cut back in order for you to live within your means.
- If your children are no longer living with you, your property may be too large for you and your spouse. You can down size your accommodation by selling the property and buying a smaller and probably cheaper one. The surplus cash can be invested in a savings account to generate additional income to supplement your pension.
- If you have a savings account you should regularly review and compare the rates you are currently getting with rates offered by other financial institutions. Contact a financial advisor who can help you find the best deals that are on offer in the money market without taking any risk of losing your nestgg.
- You may be able to save a few hundred pounds a year on utility bills merely by switching to a cheaper supplier. You can go online to price comparison sites to find utility suppliers with the cheapest gas and electricity prices. Using energy-saving light bulbs and household appliances and switching off appliances instead of leaving them on standby can also save you money in the long run.
- Get a part-time job – bookkeeping, gardening, courier service, etc, to supplement your pension. Use your skills, work experiences and your network of friends and groups to get yourself a part-time job. Your local Jobcentre and employment agencies can also help you find a part-time job.
- Have you claimed all the state benefits you are entitled to claim? These benefit entitlements include Warm Front Grant, Winter Fuel Allowance, Council Tax Benefit and pension credit. You can get your benefit entitlement checked by:
- phoning free on 0800 072 0615 to find out more, or
- writing to Eaga plc, BEC team, Freepost NAT 12054, Newcastle upon Tyne NE2 1BR. Contact the Benefit Entitlement Check team and they can tell you what benefits you are entitled to claim.
- Money management also means shopping wisely.
- Do your shopping in supermarkets an hour before closing time when food prices on items near their expiration dates will be slashed.
- Use discount vouchers which you can download on the internet or cut out from newspaper or magazine adverts.
- Check prices of goods at the high street stores but buy them online which are much cheaper.
- The latest fashion products are much more expensive than out of fashion ones. Watch out for stock clearance sales when you can buy clothes and accessories at up to 90% cheaper than when they were in fashion.
- Buy recycled products from charity shops including second hand clothes, books, household items, etc.
- When there are special offers like "Buy one, Get one Free" you can club together with your friend or neighbor and you can each get the product at half the normal price.
As you can see from the above, money management would involve making adjustments to your lifestyles and spending habits. You may not be in a position to buy things in order to keep up with the Joneses, to keep you happy when you are feeling depressed or indulge in habitual, impulse buying.
However, your money management skills can keep you out of debt and eliminate the stressors that are related to money worries.