3 Things To Axe If You Need To Cut Expenses While on Social Security
Chopping down your monthly bills is never more important than when you’re on a fixed income, like relying on Social Security to get you through the golden years of retirement. This isn’t to say you can’t spend money, but focusing on frugality can serve you best.
Here are three expenses you should definitely consider cutting if you are living benefit check to benefit check, according to experts.
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Unused, Underused and Unwanted Services
One of the first expenses you should cut from your monthly budget is any recurring charge that doesn’t pay for something essential, such as forgotten subscriptions, duplicate services, financed upgrades, and autopays that survived after the underlying need disappeared, according to Heath Squier, CTO, Equity Edge Lending.
To get started with prioritizing expenses, Squier said, “Review 90 days of statements, rank every recurring charge by necessity, and cancel from the bottom. Then re-shop insurance, phone, and internet, and direct the savings to the highest-cost revolving balance. Housing, medication, food quality, and transportation needed for care should not be the first targets.”
It’s about small edits not big sacrifices. “From a lending and cash-flow perspective, the best cut improves monthly residual income every month without creating a larger expense later…A household living mainly on Social Security needs a permanently lower monthly burn, not a heroic week of skipping groceries,” said Squier.
Car Expenses
Transportation is another huge expense that may be on the chopping block without having to factor in so much need for driving or commuting in retirement. Rob Pfleghardt, former CPA and founder of VoraPrep, thinks this should be one of the first ones to go.
“Honestly, the very first expense retirees on Social Security should look at cutting is anything related to their cars. Not just gas, but insurance, maintenance, and those monthly payments if they still have them ... People get so focused on small daily cuts, but transportation is often this huge, lumpy expense that just eats into a fixed income,” said Pfleghardt.
This holds especially true for a second car you barely use, or even a primary one that's way too much for your current needs, according to Pfleghardt. “Selling that second car, or downsizing to a cheaper, more fuel-efficient option, frees up hundreds of dollars a month, easy. That's real money. It doesn't really hurt your quality of life if you plan your errands a bit better or use ride-sharing now and then. It's a big, immediate win,” he said.
Mortgage Payments
Though it varies greatly based on location and personal circumstances, the average retiree household spends around $61,432 annually, according to Western & Southern Financial Group. Outside of healthcare and transportation, housing is one of the highest costs.
This can include mortgage payments, property taxes, insurance, maintenance and home repairs. The financial burden is particularly steep for those still paying off their homes, as 43% of older owners with mortgages are cost-burdened, compared to just 19% of those who own their homes free and clear. This is why it makes sense for retirees and soon-to-be retirees to downsize their homes, or even consider relocating to less-expensive regions.
Daisy Carrington contributed to the reporting for this article. This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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