Last month the “rent” at my retirement center went up 4%. That’s greater than the living increase from my social security and pension income. Being retired and living off fixed benefits, I’m wondering how I should anticipate further increases, particularly if I proved to be as long-lived as my mother.
So far, my strategy has been to squeeze each penny until the image of Abraham Lincoln turns blue. That’s neither a strategy nor a budget, I realize. Nor does it allow me to imagine a weekend splurge at the beach. Instead, I swing from branch to branch, like a jungle monkey, hoping another handhold will be in place when I need it. As a consequence, I’m living to pay my bills but planning for little else.
That’s why I paused over an article in the September issue of Money Magazine by Sara Max. (“How Much Money Should I Spend in Retirement?” pages. 33-35.) The advice is one even millennials might heed, if they aren’t already drowning in college debt
Her first suggestion is to have a budget. Well yes. At 82, I probably need one. If I don’t know where my money goes, how will I find it when I require it? Thank heavens, the author has a simple suggestion. Begin with 3 buckets, real or imagined. The first bucket is where I’m to put money for basic expenses. Rent, would be one. Debt payment, another. The second bucket allows for fun. A movie or dining out with friends. The last, bucket is a saving account, one particularly important to seniors. That’s the bucket I grow for unanticipated expenses, medical bills, for example.
Step two is to assign dollars to fixed or temporary needs. My Social Security and pension funds go into the first bucket to pay for basic expenses. For millennials that money comes from a paycheck. What’s not absorbed by the first bucket may go into the second: lifestyle expenses. For seniors extra cash may also flow come from IRA or 401(k) distributions.
The goal for the third bucket, the savings account, is to build a 6 month reserve for emergencies. Seniors, with their potential for increased medical needs might want to reserve more — from 12 to 18 months, Max suggests.
With my buckets in place, I should sleep better at night. Budgeting is boring, of course. And nothing I’ve written here is new. It’s simply a reminder to me and others, perhaps, that budgets are a good idea. Unfortunately, it stays an idea until I decide to do something about it.