Living on a fixed income

Living on a fixed income can be a challenge. Each person’s financial situation is different. Spending without a financial plan can lead to financial ruin. Financial plans work best when individuals make choices they are willing to put into action. By making informed choices you can create a financial plan that works for you.

Wants, Wishes, and Needs

Knowing what we want is not always easy. It may be helpful to know that others have found it takes some thought to answer this question in a meaningful way. A major factor in getting what you want is knowing the difference between needs and wants.

Have you ever thought, “If I just had more money …”? More money is not an instant cure. Wishing for money does not make it exist. When we allow money to control us, conflict and uncertainty increase. We need to be realistic in our expectations.

It is very important to learn to recognize the difference between needs and wants. A need is something you cannot live without, such as food, clothing, and shelter. A want is something you would really like to have, but you could substitute something else for it.

Thoughtful planning is the key. Planning what you want and how to get there helps you to be in charge of your own financial situation. Knowing what you want can reduce some of life’s stress and provide you with a sense of security.

Know What You Have

Be aware of what you have. Having more things is not necessarily better. Do you need the things you have? Does having these things cause you to spend more money for upkeep? Take an honest look at current income/ pensions, investments, and savings. Do you have an emergency fund? Know how much money you have and where your money goes.

Know Where Your Money Goes

Write down every item purchased and the amount spent. Keeping a record of exactly what is spent can help you to know exactly where your money goes. Then you can consider possible options. Be sure to track your spending for a few weeks before creating a plan. Be sure to track fixed, flexible, and occasional expenses. Fixed expenses are costs that are the same each month. Flexible expenses are costs that vary. Occasional expenses are quarterly, yearly, seasonal, planned, and unplanned costs.

Remember to include charge accounts and loans as expenses, too. In 1996, 1.1 million Americans filed bankruptcy. Many of these cases of bankruptcy were due to personal overspending. Credit can be easy to get. Credit overuse may make it harder to carry out your plan. Having credit does not mean you have to use it.

Choose Your Action Plan

Compare dollars available and dollars spent. Set priorities for spending. Know your limits and adjust your spending. Seek creative solutions. Then put your plan in writing. Setting short-term and long-term goals gives your plan purpose. Rethink your current buying habits. Do you buy because you have a need? Do you shop because you might find something to buy?

Remember it is okay to say no. If you are barely able to pay for minimum necessities, saying no to things you would like, but do not need, can be helpful. You may be able to think of other choices. Having a financial plan may help you say no when it is necessary.

Each person’s financial situation is unique. Do what works for you. Think positively. Avoid comparing yourself to what others are doing. Be realistic in your choices. Plan ahead. Consider substitute activities—things that you could do for little or no cost. Perhaps a part-time job or a hobby could bring in some extra income.

Once you choose your action plan, try it for a month or two. Rethink and adjust your financial plan to make it work for YOU. Keep the part that is working. Decide what needs to be adjusted to make your plan work. Your action plan will need to be fine-tuned periodically as changes occur in your life.

A major factor in getting what you want is knowing the difference between needs and wants.

Summary

Financial planning should begin 10 to 15 years before retirement or earlier. The earlier financial plans are made the better. Financial planning will not always prevent all problems, but it can prevent some and make others easier to deal with.

Ask Yourself These Questions

■ Can I find a way to spend less than my income?

■ What do I need to change?

■ What am I willing to change?

■ Did I plan to save for emergencies?

■ Are my wants and wishes realistic?

 

By making informed choices, you can create a financial plan that works for you.