It used to be that the golden years were a little more golden. In addition to social security benefits, you’d retire with a pension, and you could live off the interest earned on retirement savings. Add a lower cost of living and higher home equity to the equation, and living the good life was easy.
Fast forward to the realities of 2014, and the outlook isn’t so golden. Few retire with a pension nowadays, the cost of living continues to increase exponentially, many have underwater mortgages, and interest rates have been low for several years.
What does this mean if you’re approaching retirement or already living on a fixed income? The good news is that the frugal can and do rule retirement. While the years may not be as golden as you’d like, they can be lined with silver, if you keep these tips in mind.
1. Live below your means
This maxim has never been more important than right now. If you’ve been saving up for retirement since your college years and can afford to party it up in the Caribbean well through retirement, more power to you. If not, get real. Living on 20 to 25 percent less than your income enables you to save money for the unexpected, be it a medical problem that requires out-of-pocket expenses or a present for a surprise birthday party. One idea for if you live in a city or a place with public transportation, live the car-free life.
2. Micromanage your budget
Living below your means on a fixed income leaves very little wiggle room when it comes to budgeting. Prioritize your expenses, starting with set costs such as insurance, healthcare, rent or mortgage and utilities. Then add the average amount you spend on discretionary expenses each month, such as entertainment, food and gas. If your total expenses aren’t 20 to 25 percent below your monthly income, cut from your discretionary costs until you have enough money earmarked for savings.