Money Problems in Retirement Can Be Solved
Almost everyone has faced financial difficulties in their life at some time or other but, when you’re retired it can seem more serious because your income is fixed and your costs never seem to go down. Anyone who has been alive for more than forty years has seen fluctuations in the economy that are quite alarming. Gas and food prices are usually the most volatile, but housing costs have risen dramatically as well. The good news is that money problems in retirement can be solved by taking three important steps that may very well become your ongoing strategy for improving your financial situation.
The first step is something that you should be doing already and that is to have an accurate retirement budget. You should know exactly what you spend each month and also have an accurate record of your income from all sources. Quantify what your budget shortfall is because, when you know the size of your problem, it will dictate the best possible solution. Know what is causing your problem. Is it a one-time cost like a large medical or repair bill? Is it a tax bill that has suddenly surfaced or is it an ongoing combination of rising costs in every category? If it is a one-time cost that needs to be paid, that means everything would be fine except for this one bill that is hanging over your head. Is that really an accurate picture? If it’s a one-time bill and you don’t have the savings to pay it, that indicates a problem in your approach to your finances that you need to address. Everyone should have a savings account, and some would argue that it should represent at least six months of expenses. You should have a financial reserve ready to pay an unexpected expense and then have enough of a monthly surplus to replenish that account. You should also have investments that are designed to generate an income to supplement any pension or social security coming in. Sadly, the fact is that most retirees do not have that, and they think it’s too late to do anything about it. Money problems in retirement can be solved and taking this first step by quantifying your shortfall through a careful budgeting process will help you determine the strategy you need for the second step, which is to leverage all of your assets.
Your money problems in retirement can be solved, and you may have some hidden assets that can help.
Many retirees have more assets and options than they realize. You seek the advice of a qualified financial advisor in all matters. I am not that person and, if you get nothing else out of this article, the one piece of advice you should follow is to seek a professional counselor. I’m fairly certain that the budgeting process recommended above will be part of their advice and they will also want to determine how much money you have to work with and how much equity you might have in your house and even the insurance policies you may have. Quite often, you can leverage the equity you may have built up in your home or other real estate by either selling it and moving into a smaller house or by taking out something called a reverse mortgage. These are serious steps that you really want to examine carefully before committing to it. You want to completely understand the process and all the related costs and implications. This also applies to insurance policies. Often, a young family will take out a policy with a high payout to safeguard the children in the event of a disaster and now, thirty or forty years later that policy might not make as much sense. There are ways to convert those policies to cash but, again, you want to fully understand the cost and implications. Many money problems in retirement can be solved if you have equity in a house or insurance coverage that you no longer need but you want to fully understand the process before proceeding. The third step you can take is something you should be doing anyway.
The third step in solving your money problems is to look at the money you’re paying out and the money you have coming in and seeing if either of these can be adjusted in your favor. For example, as you’re working through your budget process, carefully examine each cost to see if it can be reduced or eliminated. Phone bills, cable bills and insurance costs are prime targets for savings. Food costs can be controlled by eating out less and shopping for sales and, if you have two cars, check out the possibility of going down to one. This cost-cutting exercise should be an ongoing one and is probably the primary method to improving your financial situation. Money problems in retirement can be solved by reducing the amount of money that you’re paying out each month. Even annual bills should be examined for potential savings. You should consider appealing your real estate tax bill for possible savings and there are organizations that will do that for you (although they will probably take a percentage of the money they save you). Spending just a little time in this effort will convince you that there is money that can be saved and you can almost make a game of the process. The more money you can save, the better your financial picture can get. What most people don’t look at is the other part of this equation and that is whether you can increase the amount of money that is coming in each month. This is where it can become very exciting.
During your talks with your financial advisor, your current situation should be discussed thoroughly and your investment strategy carefully examined. Perhaps you invested extremely conservatively, and your rates of return are not meeting your needs. Your investments can be adjusted at any time and there are ways to increase your return and still stay within your tolerance for risk. This is an important conversation to have with your advisor and a lot of money problems in retirement can be solved with just a few adjustments. But, aside from investments, there are other ways to generate more income. The obvious way is through employment, and this might be especially attractive if your current financial problem is due to a one-time occurrence. It might make sense to work until your debt is paid off. But if working at a job again after experiencing the freedom that retirement gives you isn’t something you want to consider, there are other things you can do. You can sell some of your “stuff” that you’ve collected over the years like a lot of other people are doing. The internet has taken those old garage sales and converted it into a worldwide marketplace with sites like eBay. In fact, the internet has a huge number of retirees starting their own businesses to address their financial concerns and provide them with a new and challenging hobby that can bring in quite a bit of money. Starting a website in retirement is a lot of fun as I’ve learned first-hand. The point that you should keep in mind is that your income doesn’t have to be “fixed” and you have the ability to increase it any time. Money problems in retirement can be solved, and it can open up huge possibilities. Yes, you can pay off those bills, but you can also save up for that trip around the world, membership in that country club you’ve dreamed about or just help the children out with a few extra dollars. You call the shots. You just have to take that first step because it’s time to Enjoy Retired Life!
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