Saving on a Fixed Income

Woman's hand stacking coins for budget

If you mostly rely on your structured settlement annuity payments or your lottery prize annuity, then you are living on a fixed income. This simply means that these guaranteed payments make up the majority of your annual earnings. Oftentimes, retired people also will live on fixed incomes that the bank is paying out as a result of earlier investments.

Sometimes it can be difficult to save on a fixed income. However, it is possible as long as you make wise decisions regarding your available funds. Here are some tips for living successfully on a fixed income.

Better to Rent?

Owning a home is the embodiment of the American Dream, and most people probably will tell you that you should always purchase a home (if you can) rather than rent a property. However, unless you already bought your home and can afford to maintain it, renting is usually the better bet if you have a fixed income. Owning a home can get to be quite pricey when something breaks or needs an upgrade. If you aren’t able to save for these unexpected circumstances, they could sink your budget quickly.

Experts typically advise that your monthly mortgage or rent payments not exceed one third of your income. You want to reach as close to that goal as possible, but in some areas that can be difficult. In that case, you need to scout for items you can cut from your budget. For example, if you live in the city or a place where public transit is easily accessible, you may want to sell your car.

Watch Your Grocery Budget

When people have a difficult time discerning why their budget has dwindled more than expected, many times the culprit is food. Eating out frequently will drill a hole through your budget, and cooking at home is an easy way to remedy that.

Be purposeful about what you buy at the grocery store—don’t just scoop up whatever looks good in each aisle. In the United States, the average person wastes 30% to 40% of the food he buys each month. If you’re having a hard time gauging what you will realistically eat, try food shopping only for what you will eat that day. It will involve daily trips to the store, but buying food for one day takes much less time than a bulk shopping trip.

If you haven’t cut coupons before, now is the time to start. For some people, grocery couponing can become an art. You’ve probably seen the TV shows about people who use couponing strategies to get their food nearly free. That extreme may not be realistic for your lifestyle, but check out this guide for maximizing your coupon benefits.

If you aren’t a natural cook, look no further than the Internet for thousands of recipes to suit any diet imaginable. Most sites offer them for free. Just download and print them, or choose one of these top-rated recipe apps.

Make a Budget

One of the key ways to ensure you are living within your means is to make a budget. Essentially, this means assigning portions of your earnings to various financial obligations and making a plan for the remainder. This will allow you to see where your money is going, and whether there are areas that could be cut back. Additionally, rather than carelessly spending your extra money, you will set a specific goal for it to make its use more efficient.

Your take-home final pay is called your net income, and that is what you should factor into your budget. It is easy to overestimate your spending ability if you do not calculate for deductions. Also take a look at your assets—any items that have value available to meet debts. If you own a home, have a car or own other valuable property that could be sold to meet an emergency debt, you should know the total amount that is available to you.

If you are having trouble tracking your budget on your own, many online budgeting tools and phone apps can make the task easier. Click here for the top-recommended budgeting apps for 2016.

Reduce Utility Costs

Many people are under the false impression that turning off lights is all they need to do to minimize their utility bill. In reality, most lamps and overhead lights contribute minimally to electric costs. Dialing back your thermostat in winter and up in summer is a great way to save, especially if you have electric heat in the winter.

Other ways to reduce utility costs are to ensure your house or apartment is properly insulated, to use power strips, and to make sure you turn off—and unplug—most appliances when you are not using them.

If you have a cable and Internet provider, make sure you are on—and remain on—a plan you can afford. Many companies will sell you a package with a discount rate for only a period of time before prices rise sharply. If your discount period expires, call the company and ask if they have current promotions you are eligible to use.

Similarly, take a look at your phone plan and make sure your plan is well suited for you. Take a look at your plan’s features and make sure you are not overpaying for things you don’t use, such as monthly data. Most people subscribe to one of the four major carriers—Verizon, AT&T, T-Mobile and Sprint—but dozens of alternatives exist. This article reviews plans from lesser known companies that offer less expensive packages.

At SenecaOne, Your Trusted Source® is staffed with professionals that are here to help you. Our team will work to make sure you understand the terms and conditions of your structured settlement or lottery prize.