If you get hit with a higher bill than expected, what do you do? If you just pay it, you’re missing out on all the bargain hunting fun we retirees get to do now that we have more time in retirement. In retirement we have to contend ourselves with constant rising prices. Call it inflation, call it corporate greed….whatever it is, we have to learn how to resolve our financial predicaments. Our first impulse might be to go out and earn more money, but in retirement that isn’t always possible. We might be too ill or too old. However we slice it, despite being on a fixed income we have to find solutions to help us keep our balances in check.
One of the major expenses most retirees have to contend with is the constant, steady rise in health care expenses. As I said, some of us may not have that three legged stool to fall back on (Cash consisting of savings account, Social Security & Pensions, Investments consisting of income from annuities, stocks, bonds, CD’s and other Wall Street factions, Work consisting of actual labor) to help offset rising costs.
I’ve had two major rising expenses to contend with these past two months. The first being an 85% increase in my Part D Medicare Health Care Insurance. In inflation numbers, the cost to cover my medications increased a whopping 46%. I would need 46% more cash to pay for the same exact medication as I had last year. No investment is going to give me a 46% return. What to do?
To calculate both the rising costs and inflation costs of most everything you buy, here is the formula. You subtract the old cost from the new cost to come up with the difference. If you want to know the rise in costs, divide the difference into the original number and then multiply by 100. To calculate the inflation rate, take that same difference and divide it into the new cost of the item and then multiply by 100.
The second financial problem I encountered within the last two months, was an income decrease on a fixed rate CD I was invested in since late 2017. The CD was paying a fantastic, steady, monthly 4.25% but recently got called by the bank. That meant all my investment money was returned to me and the CD was closed and gone forever. Try as I might to re-invest the same amount of money for the same income, I was coming up $136 short per month. Over the year that reduction totaled $1,632 less per annum! When you are on a fixed income how do you make up this deficit?
Well, first off, see Number One, up above. I lowered my medical expense an estimated $264 a year by choosing a less expensive Part D plan. Next, I looked over all of my monthly expenses to see what else I could cut. You may think at times that you’ve come to the end of the expense-cutting-road, but trust me, there’s always something you can do without. The obvious ones would be cable and cell phone but they are already at their lowest price points so those two ideas were moot. I decided to cut our restaurant meals from $125 a month down to $25. I eventually raised that back up to $50 a month (by eating out at more cost effective places such as Panera, McDonalds and a local cafe’ here in my neighborhood where you can still get a $1.75 croissant and a $1.25 cup of bottomless, fair-trade imported coffee for a nice Sunday brunch!) The $75 a month savings totaled a whopping $900 for the year!
I went through the usual review of all our insurance (car, RV and home) policies. Every one of them had already utilized the higher deductibles as a means of saving money, so those were moot also. I was able, however, to eliminate our dental insurance policies since they proved to be worthless. Too much out-of-pockets costs made those policies moot. This came to an annual savings of $516.
The last thing we did and in my opinion proved to be the most beneficial of all. We started using cash only for grocery shopping. You’d be amazed at the realization that when you only have $70 or so cash in your hand, you tend to follow your shopping list and do not throw impulse items into your shopping cart. I grocery shop now with cash in my wallet, a list in one hand and a calculator in the other hand. I know instantly how much I am spending and I will do anything to avoid the cashier embarrassment of not having enough money to pay for my food. My monthly food bill is still that $500 but there are no more extras in my cart. That deed alone must be saving me at least $100 a month, which totals another whopping amount saved of $1,200 for the year!
The less money I need to spend, the more my money can remain saved and invested. This year I finally qualified for the Senior Citizen property reduction program here in my state. Our taxes went down to $238 a month from $420 a month. That was a welcome financial relief savings of $182 a month, which equals $2,184 per year! DH said that one thing alone was more than sufficient to offset my rise in my Plan D coverage. To me, I see it as not withdrawing the $2,184 out of savings and ear marking it for something else. Like longer, more frequent vacations in our future. For now, the cash stays invested, earning us more, thanks to compounding. Hopefully we won’t need it to offset higher prices coming our way in the future. I hope we can just keep adjusting our spending by eliminating what we don’t need or want and concentrate on what we do need and want.
This is how and what we do to keep our expenses (between $2,400 to $2,900 a month) in balance. Our system may not work for everyone. If you have a different plan that works for you, please share. I may not have all the answers but I am always willing to listen and learn.
Live well and prosper, my friend. Live well and prosper.
SIDE NOTE: I did increase one of my categories. Since DH and I won’t be going to the movies much anymore (too expensive), I decided to cancel my Netflix Membership @$8.99 a month and replace it with Amazon Prime @$14.05 a month (taxes included). That’s a $5.06 monthly increase. I justify the added expense because have you seen what Netflix has (or hasn’t) been offering lately? Their choices in movies has been abominable. Amazon Prime not only has more (great, fabulous) movies, more TV shows and documentaries BUT you can also rent current, late edition movies starting at only $3.99 per view! I’ve been having a blast watching all these terrific movies (fantastic escape from real life!) Can’t wait till The Marvelous Mrs. Maisel Season 3 is released this November! In the interim, I’ve been drooling over Paul Newman movies, binging on FleaBag, a recent Emmy Award winning show and watching some of my own fave and former HBO series favorites, such as The Sopranos.
I moved our two recliners up close to our flat screen TV and let the movies rip. Life doesn’t get any better than that!