Wealth

Personal Finance Tips for Someone on a Fixed Income

There are different reasons you
might be on a fixed income. For example, you might receive
disability payments
, or you could be retired.

Regardless of the specifics of
your situation, being on a fixed income can be challenging as far as budgeting
and money management but not impossible.

If you’re on a fixed income,
consider the following personal
finance tips.

Create a Budget

It sounds so simple to say that you should create a budget,
but even with its simplicity, it’s something many people don’t do, including
when they’re on a fixed income.

To create a budget, start by writing down how much your
monthly income is. That’s fairly easy if you have a fixed income.

Make sure you integrate income from all sources, including
your retirement savings, government programs, and pension. Then, write out your
fixed monthly expenses that are the same every month.

Once you have those two components mapped out, you can see
what’s left for variable spending and extras.

Lowering Expenses

When you’re on a fixed income, if you do the math and find
that you don’t have the money left that you’d like for discretionary spending,
you can do one of two things—find a way to increase your income or cut your
expenses.

Of course, you can do both as well.

If you’re starting by lowering
your monthly expenses
, there are different specific strategies you can
take.

You can reduce your housing costs because, for many people,
this is their highest fixed cost.

You might downsize to a smaller home and if that saves you a
few hundred dollars a month, it’s a big difference in your budget.

You might also want to move somewhere that has a lower cost
of living and lower taxes.

If you’re on a fixed income, try to eliminate as much debt
as you can. Create a strategy as part of your budget to eliminate debt,
starting with the most expensive debt first.

When you’re on a fixed income, one of the last things you
should do financially is use a credit card because the interest will eat up a
lot of your budget.

Another big expense that you might be able to reduce is your
transportation costs.

If you have a newer car, trade it for an older car, for
example.

Increase Income

If you’re on a fixed income and you stay home, there are
ways you can still make
a side income.

Before you focus on making more money, do be aware that
having SSDI benefits do mean that you may face income restrictions, so ensure
that you don’t make so much that you lose those.

If you’re retired, this may be less of an issue, although in
some cases, still something to think about.

There are many options to work from home and earn extra
income. For example, if you have any specific skills, you might want to be a
freelancer in that area. You might also be able to find work as a customer
service rep from home or a virtual assistant.

Other Tips

Some other personal finance tips if you’re on a fixed income
include:

  • Create a consolidated financial calendar. This
    will be where you can write down payments that you’re going to receive and also
    payments you have due. This will help you avoid late fees and help you have
    more control over your finances.
  • Be strategic when you pay off debt. You want to pay
    off the debt with the highest interest rates first in almost all cases.
  • There’s one tip that you can follow which is to
    take a minute out of your day everyday to check out your finances and see how
    they’re looking.
  • Set specific financial goals for yourself
    because you’ll be more likely to achieve them.
  • When you’re setting financial goals, make them
    small enough that you can achieve them, which will then help make sure that you
    feel positive about your financial situation.
  • Cut out bad habits. Many of the things that we
    spend the most on in terms of discretionary spending also happen to be not
    great for our physical and mental health, so try and find places you can
    eliminate these and boost your health in the meantime.

When you feel like you’re struggling because you’re
on a fixed income,
work to adjust your mindset. Change how you view your
financial situation and take back control so you can make positive, realistic
changes.

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