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This month we are featuring a guest post written by Jim McKinley of moneywithjim.org. Jim is a retired banker who enjoys helping others make the most of their hard-earned money. He shares insight on a variety of financial topics, and his services are 100% free of charge.
Living on a fixed income changes how you spend money. Without future earnings coming your way, it’s important to focus on ways to make your savings last. While it’s always smart to be strategic with your money, living frugally doesn’t have to mean depriving yourself! After working hard for so long, you deserve to enjoy these years — you just have to do it right. That means knowing where it’s safe to treat yourself and where it’s smart to take a cautious approach.
Where to Be Cautious
Your Home: Upsizing, downsizing, destination retirements — retirees have a lot of dreams for their homes. However, before you start to eye listings, think carefully about the financial implications of selling. On one hand, selling could help you shrink housing costs or get you into an age-friendly home that makes it easier to age independently. On the other hand, housing is the single biggest expense seniors face, and overspending on your home could leave you without liquid assets to cover other important retirement costs.
Before buying or selling, carefully assess your budget to determine what you can reasonably afford to spend. Then, assess what your home is worth and what a new home would cost to decide if a move is worthwhile. Be sure to include hidden costs like property taxes and repairs as well as aging-in-place modifications you’ll need to undertake.
Long-Term Care: There’s another reason it’s wise to maintain equity in retirement: You may need to tap it for long-term care at some point down the road.
Most seniors hope to age at home. As a result, they fail to plan for long-term care costs. But the reality is that most seniors will need long-term care someday, even if only temporarily. When that day comes, they may be crippled by the costs. Whether you receive care at home or in an assisted living facility, long-term care costs can exceed $50,000 a year.
Where to Indulge
A Safe Vehicle: While cars can be costly, it’s worth upgrading your decades-old economy car. Safety features have come a long way in recent years, and technology like forward collision warning, back-up cameras, and blind-spot detection is now standard in new cars. Of course, you don’t have to buy a brand new automobile; purchasing a lightly-used certified pre-owned car can get you all the latest safety equipment for far less.
Your Hobbies: While not all hobbies are frugal — yacht-racing probably isn’t the hobby to get into during retirement — hobbies are mostly a safe way for seniors to spend money. That’s because hobbies keep seniors healthy and give them a sense of purpose. When you stay physically and socially active, you’re more likely to maintain the health and support network you need to thrive.
Instead of letting financial anxiety cause you to pinch pennies in retirement, take control of your finances. When you get the big stuff in order, you have the freedom to treat yourself in little ways that make retirement worthwhile.
DISCLAIMER: This article contains information that is intended to help the readers be better informed regarding exercise and health care. It is presented as general advice on health care. Always consult your doctor for your individual needs. Before beginning any new exercise program it is recommended that you seek medical advice from your personal physician. This article is not intended to be a substitute for the medical advice of a licensed physician. The reader should consult with their doctor in any matters relating to his/her health.