Monday, July 25, 2011

Budgeting-- Even More Important for the Elderly

Budgeting. Ugh, not a process that anyone enjoys but everyone know that should be done. It doesn't matter if your income is $1000/month or $100,000/month, it's still important to plan spending levels. Many people assume that once they retire or reach a certain age that they no longer need to think about budgeting. The reality is just the opposite, budgeting is even more important for the elderly.

The biggest fear that most elderly people have is outliving their money. But, a big mistake that the aging make is to not pay attention to where they're spending their money. I think the assumption is that their expenses at this stage of life are beyond their control. This is far from true.

Here are some examples of places to look to save.

Drug costs. Most seniors today have Medicare Part D prescription drug coverage. But, this doesn't mean that there aren't ways to save. Pay attention to what is prescribed. Some drugs may not be covered in your plan but a good substitute may be. Look into different stores or mail order options to see if the prices vary. Pay a lot of attention to over-the-counter products. There are huge price differences from one retail chain to another. Convenience becomes a factor in these decisions, especially if driving is a problem.

Car-related issues. Cars are expensive to drive, maintain, and insure. Many elderly couples keep two cars. As they age, there may be less of a need for both cars--maybe they always go out together, maybe one really should no longer be driving, maybe they live in a community that provides some transportation services.

Lifestyle. Ah, this is a tough one. Most people, the elderly included, want to continue the same lifestyle that they are used to. Again, it doesn't matter what income bracket. An elderly person's income may not be able to continue to support belonging to multiple country clubs, a lot of restaurant dining, or buying generous gifts for family members. It also doesn't mean going to the other extreme and living like a hermit. But, as hard as it may be to change, staying the course when it comes to day-to-day lifestyle issues may not be realistic.

The key to budgeting is to realistically examine where money is being spent and make conscious decisions about spending instead of blindly going forward month-in and month-out. This is true at any age but especially true for the elderly. There aren't too many options for generating additional income to cover the spending.

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