How to Create a Monthly Budget for Necessary Expenses
There are many monetary concerns you may experience as a senior citizen. One of your main concerns may be how to lead a comfortable lifestyle while you are no longer working regularly. When you suddenly find yourself on a fixed retirement income, your expenditures cannot remain the same. Making some adjustments to your saving and spending habits is a requirement. If you are like many other people, you may not have an idea of exactly how much money you use to pay for certain items each month. All you may know is that you are spending too much. The first step to gaining financial control is to take a close look at your financial situation, including the amount needed to pay all of your unavoidable bills each month. To do this, you must create a monthly budget. A budget can help you start to gain an understanding of your spending habits and needs. Below are several tips to help you learn how to create a monthly budget for all your necessary expenses.
Use Tools to Help You Budget
Writing a monthly budget out by hand may seem daunting. Avoid the stress by taking advantage of modern budgeting tools that can help you. Online checklists, calculators and worksheets can give you insights into how you can save more and spend less during retirement. You can also create your monthly budget on the computer using a spreadsheet program. With an online budget, you can easily make changes when necessary.
List Your Income and Assets
Your budget plan must start with an assessment of your income. List how much you earn from each source. Also, include a schedule of when those earnings are received. By doing this, you will not accidentally plan to pay a bill early in the month when funds are not coming in until later. Note typical retirement income sources, such as monthly pension checks, rental property income and annuities. Additionally, include unusual income sources, such as royalty payments.
If your monthly income is too low to allow you to live comfortably during your retirement, consider tapping into some of your assets. Determine how much money you have available from sources like stocks and savings accounts. Then, examine the value of your home and how you can access its equity. For example, taking out a reverse mortgage may allow you to pad your income for a while. If you do tap into your assets, some will deplete over time. Therefore, you will need to adjust your budget as your available assets change.
Identify Necessary Expenses
When budgeting for necessary expenses, begin by identifying them. They include debt payments, like credit cards, and expenses vital for your survival. Groceries, mortgage payments and basic utility bills are all necessary. Do not list non-essential monthly services like television access or newspaper delivery. Outline annual obligations, such as insurance premiums or property taxes. Budgeting some money towards annual payments each month will prepare you for when they are due.
Find Ways to Reduce Necessary Monthly Expenses
Once you have a list of your current monthly expenses, see if there are ways to reduce them. Some expenses may not be as essential as you originally thought. For example, if you have both a landline and a cellular phone, the landline may be unnecessary. Some expenses may be higher than necessary. For example, you may be able to refinance your mortgage to get lower monthly payments or consolidate your credit card debt. Additionally, paying larger amounts towards expenses like insurance will reduce the interest you will pay over time and monthly fees you may be responsible for.
Include a Category for Emergencies
Emergencies do not occur as predictable monthly expenses. However, you must still set aside funds for them each month if you want to be prepared for when they do strike. Emergencies you may encounter can range from major medical emergencies to home repairs. Calculate how much emergency money you can save monthly after you outline your basic monthly expenses.
Schedule Necessary Expense Payments
A hidden way to potentially reduce your monthly expenditures is to schedule necessary expense payments ahead. Forgetting one or more payments can cause you to deal with rising interest rates and late fees. Making payments automatically online will take these pressures away. Many companies will reward both manual online payments and automatic payments with lower rates and other perks. Additionally, by paying bills online you will reduce your need to buy checks and mailing supplies.
Make Sure Your Remaining Flexible Income Is High Enough
The last step necessary for creating your monthly budget is an assessment of your flexible income. Flexible income is money used to support your hobbies and retirement goals. It is necessary in its own way if you want to have a comfortable retirement. It may be necessary to adjust your budget calculations to meet your goals. In an extreme case, you may need to completely change your lifestyle. One way to do so is to move into smaller living accommodations or a less expensive neighborhood. A less drastic option is to split expenses like groceries and travel with a loved one.