Once you retire, living on a fixed income has its challenges. One of the best ways to manage your money and make sure you meet your needs and avoid unnecessary debt is to budget. Too many seniors plan only with long-term budgets, but one of the tricks for successful budgeting is to have interim short-term budgets. (See step #1)

Unless you budget your money, you’re begging to go deeper into debt, and making it impossible to save. Take these steps to figure out how much money is supposed to go where so you can control your spending accordingly.

Steps

• Create a budget every time you get money. For most people, this is once every two weeks. Sometimes it’s weekly, sometimes it’s monthly. Either way, it’s a regular interval, and it’s the best time to decide how you’re going to spend your money. Make a personal rule that you won’t spend any of your paycheck money until you’ve worked out your budget.
• Make a list of all the things you’ll need to pay for until the next paycheck, such as:
  • Rent/mortgage
  • Utilities
  • Medicare/Medigap Premiums, medications
  •  Food/groceries
  • Vehicle payments, insurance, maintenance (e.g. oil changes, tire rotations), Gas
  • Any debt payments
• Anticipate how much you’ll need to pay for each and write that amount next to the corresponding item on the list. You can also opt to pay for a fraction of something that isn’t going to be due until after the next paycheck. For example, if your rent is $800 due on June 1, you just got paid $700 on May 12, and your next paycheck will be $700 on May 26, it may be wise to set aside $400 from this paycheck for rent so that you only need to take $400 out of your next paycheck to pay for rent.
• Add up all of the amounts (we will call this your regular expenses) and subtract it from your paycheck amount. Do you get a negative number? Then you are living way beyond your means. Something has to go, or you will have to find a way to supplement your income. If you have money leftover, split that money up into a few groups:
• Savings. Ideally, this should be about 30% of your paycheck, although even 10% (if you do it consistently) is pretty good. Build up enough savings for an emergency fund (6 times your regular monthly expenses), then start saving money to invest.
• Emergency money. I like to keep about 25% of regular monthly expenses in an emergency fund. This would cover things like sudden unexpected car repairs, or extra medications if you get sick or that Grandson’s birthday you forgot.
• Spending money. This is whatever is leftover after you subtract emergency money and savings money. It’s what you’d spend on things like clothes, eating out, movies, gifts, and anything fun, basically. If you start to cry when you realize how little fun money you have, then you need learn How to make some extra money.

Keep everything but your spending money out of reach. Leave everything (except your spending money) in the bank. Withdraw all of your fun money in cash, and leave your debit card (and credit card[s]) at home. Use the cash for anything you want, just make sure you make it last until your next paycheck. You might not want to carry it on you all at once, but having physical cash will help you keep better track of your fun money than using a card.