For retired folks on fixed incomes, setting and sticking to a budget has never been more critical. Even though their income is limited, their expenses are not. Health costs, for example, can be wildly unpredictable for folks over 65. Gasoline prices keep bouncing up and down. And with inflation still off to the races, food costs are higher than ever.
If the past is any predictor of the future, there’s lots of budgeting work to be done. Some 24 percent of Americans age 58 and older failed to stick to their budgets in 2022, according to a December survey of 1,000 Americans by Credit Karma, the consumer financial platform. Just as concerning, 26 percent of those surveyed didn’t save any money over the past year. And perhaps most worrisome of all, 17 percent racked up unexpected credit card debt, mostly due to unpredictable health expenses.
What to do? First and foremost, set and strictly keep to a budget in 2023, say three experts interviewed by AARP who regularly consult with older folks on how to manage annual budgets. “It may sound obvious, but everything else is based on that,” says Courtney Alev, consumer financial advocate at Credit Karma. “Setting a budget can help you avoid a lot of financial mistakes and bad habits.”
Here are the 15 best budget-setting tips for 2023:
1. Estimate your income
It’s impossible to set a budget without knowing precisely how much money you’ll have coming in, says Trent Graham, program performance and quality assurance specialist at Greenpath Financial Wellness, a nonprofit organization that provides free budget consultations to those in need of assistance. To do this, you trace and project all sources of where your cash will come from over the next year. This includes Social Security payments, pension payments, any work income and income from investments.
2. Estimate your expenses
This is harder than it sounds. The best way to do it is to go through your bank statements and categorize your expenses like housing, utilities, groceries, health care, and discretionary spending such as eating out and travel, Graham says.
3. Use a budget checkup tool
The National Council on Aging has created a special online budget checkup tool for older adults called the AgeWellPlanner. It’s specifically designed for folks 65 and up who don’t know how to create an annual budget, says Genevieve Waterman, director for economic and financial security at the National Council on Aging. AARP’s Money Map is also a great budgeting tool; no membership is required.
4. Use a benefits checkup tool
Regardless of your financial situation, it’s smart for older folks to educate themselves about any benefits for which they might qualify, Waterman says. The best way to do this, she says, is through the council’s free online tool, BenefitsCheckUp. Americans leave more than $16 billion in government benefits for which they qualify on the table every year, she says. For example, she says, the tool can help link you with local programs that can financially assist older folks who are struggling to pay real estate taxes.