Written by Georgina Taylor
Retirement is a great thing to look forward to: you’ll be able to spend more time doing what you love and you won’t have to worry about the daily responsibilities a life-long career requires. Once retired you will be in control of your time and free to be as active or relaxed as you choose. Yes, the best days are yet to come.
Unfortunately, many people are not financially prepared to live a life without having to work for a living. Without enough money coming in to pay the bills and still have some left over for you, you may find yourself in a downward spiral that affects your credit score, making it harder to find relief. Managing your finances on a fixed income is the most important thing you can do in retirement so you can enjoy the fruits of your labors. Here are some helpful hints.
Know Your Budget
Knowing exactly how much money you need every month to live is very important. This will help keep you from failing to pay loans, credit card debts or mortgages that you are responsible for.
First, figure out how much you will need for living expenses: house payments, food, insurance, gas and electric, phone, internet, any medicines you pay for – anything you cannot miss a payment on. Secondly, choose an amount to set aside each month for emergencies: you never know when you’ll need access to cash because of an accident or other unforeseeable event. One rule of thumb says you should set aside enough to cover all your expenses for six months. Finally, think about any short-term investments you want to make and set aside a little for those.
Everything left over is yours to do as you please.
Keep Your Credit Score Up
By paying your bills on time, you lessen the risk of your credit dropping in retirement. This can help you for future purchases, like finally buying that dream vacation home or helping your grandchildren through college.
Although you’ll be on a fixed income, make sure to pay off debts as soon as you can to avoid problems. Even though you are retired it is important to keep your score high. Should you need to improve your score, there is software to improve your credit score. The service provides you with credit reports from agencies, identity theft tools, as well as various reports, charts and graphs to assist you in your efforts.
Don’t let your credit score slip just because you retire: stay on top of everything and you’ll have plenty of great days ahead.
Look for Ways to Reduce Fees
Surcharges and fees for basic things like bank accounts and credit cards should be a big no-no during retirement. A few fees here and there can really add up if you are on a fixed income.
Look for ways to eliminate fees by using newer technology. Find a bank that offers free direct deposit so you can have all of your checks go into the account without a yearly fee. You can also choose online banking to move money around without penalties. If you use a credit card why not one gives you points toward future purchases? The more ways you can find to eliminate fees, the better your financial situation will be.
Consider a Reverse Mortgage
If you are over 62, you may qualify for a reverse mortgage, which will allow you to forgo your mortgage payments. This is a great way for older retirees to save some cash to use for other bills and purchases.
With a reverse mortgage you use the equity built up in your home to pay for your loan, so the more equity you have, the better. This can really take the burden of a large monthly payment off of your shoulders so you can enjoy your retirement. If you take a reverse mortgage, although you won’t have any payments you will still be responsible for property taxes and your homeowner’s insurance.
Open Direct Deposit
Chances are, once you retire you will be receiving money from several different sources. You may have a pension or 401K that you draw from each month or dividends from stock or social security. If you don’t learn to manage these sources quickly, you may find yourself with less money than you planned.
Having each of these sources deposited directly into your savings or checking account eliminates the need to keep track of everything. Funds instantly arrive in your account the moment they are disbursed, so you don’t have to worry about forgetting to deposit a check. This way, all of your money will be easily countable and retrievable, giving you one less thing to worry about so you can enjoy your retirement.
If you manage your money right, there’s no reason retirement can’t be a great time without financial worries!
Georgina Taylor works closely with those approaching retirement age to get their finances in order. She is a personal finance consultant for the over 50s and shares her knowledge around the web.