Tips for Teaching a Senior How to Budget

April 6, 2022 by Jenny Smedra

What do you do to help a senior learn how to budget?

Budgeting is a skill you need to practice at every stage of life. But, it becomes even more crucial during your retirement years. However, if the person was never taught how to live on a budget, this can become a huge challenge. And with rising inflation and medical expenses, more seniors struggle to make ends meet while living on a fixed income. If you don’t carefully manage your money, you could outspend your retirement accounts. As I am dealing with these issues in my own family, here are a few tips that have helped us when teaching a senior how to budget.

Why Senior Citizens Need a Budget

1. Your needs change.

Any time you experience a major life change (graduation, job status, marriage, moving), it’s a good idea to review your budget. As your needs change, your budget should as well. When we get older, medical expenses will likely increase. But, other expenses such as mortgage payments and property taxes decrease if you downsize. And, you could completely eliminate some expenses like car payments and the cost to maintain your vehicle if you stop driving. Your previous budget may no longer work for your new financial situation.

2. Social Security benefits aren’t enough to retire.

The sad fact is that your social security benefits will not provide enough to cover living expenses in the United States. Your options are to move somewhere cheaper or find ways to supplement your income. However, sticking to a budget can help you ensure that you get the most from your benefits.

3. You need to preserve your savings.

Once you stop earning a regular salary, the way you view money also needs to change. Otherwise, you could easily lose track of your spending and blow through your savings. Therefore, you should evaluate and adjust your monthly spending to preserve your savings. When you are living on a fixed income, you’ll want to ensure your retirement funds will last you as long as possible.

4. You can’t afford to go into debt later in life.

After a lifetime of hard work and financial planning, the last thing you want is to accrue debt after retirement. Some people are forced to return to work to afford their lifestyle. Those who cannot usually find themselves with mounting debt as their health declines. And, this debt won’t disappear when you are gone. Going into debt later in life means collectors will seek unpaid debts against your estate as well. Poor spending habits will also affect your family or beneficiaries.

5. Physical limitations make everything more difficult.

Time will slow us all down eventually. And, this makes the daily tasks of dealing with paperwork and transportation even more difficult. Failing eyesight, arthritis, memory loss, and the loss of driving abilities make it harder to get things done. Having your budget and disbursements in place while you are still physically capable will make it easier down the road.

Helping Your Senior Learn How to Budget

Helping a senior citizen learn how to budget can be extremely challenging. As my dad’s health declines and he can no longer handle their finances, my mom is having to learn and take over these responsibilities. However, my dad was the one who controlled the purse strings and kept track of everything. Unfortunately, my mom wasn’t included in many of these conversations, so she was unfamiliar with their situation.

Not only is she getting a crash course in her current investments and finances, but she is also learning how to live on a budget. Since my dad did all the budgeting, my mom never had to watch her spending habits or practice much self-control. While some bad habits are hard to break, my mom is proving that she is a quick study.

Creating a Monthly Budget

In theory, budgeting is simple. So, we decided to start with the basics. We first calculated their total monthly income and then tallied up their expenses. We then subtracted the expenses from the income to see how much she was overspending. To create her monthly budget, we accounted for:

  • Monthly social security and pension checks
  • Other assets and sources of income
  • Expenses for utilities, groceries, transportation, medications, memberships, other necessary costs of living
  • An emergency fund

This was all pretty simple since she uses a single credit card for all her expenses which she pays off every month. While she was only a few hundred dollars over budget, the ultimate goal is to live below her means. This means she needs to be spending less than she has coming in each month, especially if she wants to avoid withdrawals from her retirement accounts. We also had to consider how her budget may change in the future.

I was prepared to meet much greater resistance. Some people struggle with financial discipline, and these habits can be even harder to break later in life. Luckily my mom is very reasonable and not completely set in her ways. While it may take longer to learn new skills or become harder to retain new information, she is adapting very well.

Tips to Make Budgeting Easier

1. Talking to aging parents about their finances can be a delicate topic.

Even though I want the best for my mom, I sometimes have to remind myself that this is her retirement. Therefore, I’m careful to always show respect and not dictate rules as if I’m talking to a child. Instead, I offer suggestions and use my background to give advice. It can be time-consuming and frustrating to explain difficult concepts, but I remain patient until she gets it. She is capable enough to handle things on her own but humble and self-aware enough to ask for help.

2. It requires cooperative efforts at every step.

From the beginning, we jumped into budgeting as a cooperative effort. I helped her make the first few payments and then set up automatic payments going forward. We also went through her credit card statements to make sure she isn’t hemorrhaging money. She regularly donates to several causes, but I want to make sure she isn’t being taken advantage of.

3. Keep things simple.

My mom loses interest whenever conversations take a financial turn. So, I avoid getting too technical and explain things in plain terms. She doesn’t want to know why markets are fluctuating, just how the laws and requirements apply to her. We use a simple method to track expenses and pay bills. We have also discussed setting up a living trust that would give her a regular distribution. This was, she doesn’t stress as much over managing her money and can enjoy her golden years.

4. Find ways to reduce costs.

The other way she is stretching her budget is by looking for ways to reduce costs. She isn’t ready to downsize to a smaller home yet. So, we are evaluating her insurance plans, changing telecommunication services, canceling unused memberships, and utilizing senior savings and discount programs. The Area Agency on Aging can offer you more resources and guidance to find state and federal programs for seniors on a budget.

5. Set up a financial system that works.

There is no one-size-fits-all budget. Even the best plan will fail if you can’t stick to it. My family feels it is better to work together to find the best financial plan to help my mom live on a senior budget.

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