How to Plan Your Budget With a Fixed Income
Living on a fixed income has its pros and cons, but you can work both to your advantage. By definition, fixed incomes don’t vary, at least not by much. The downside is that inflation could impact its value, and you can’t predict to what degree. The best course of action is the same, whether your income is fixed or not: Cut expenses and build up savings. So how do you plan your budget with a fixed income?
Understand Your Income
Before you can create a workable, fixed-income budget, determine exactly what you’ve got. This should be the simplest step. If you’re using budget software, it’s easier because you can enter the information once, and the software does the rest. Social Security and pension payments, and any other set, dependable income gets tallied. This lets you reasonably predict your income for weeks, months, and even years into the future. That’s a benefit that people who don’t live on a fixed income can’t enjoy.
Determine Your Monthly Expenses
Everything that you pay for regularly, such as a mortgage, utilities, groceries, vehicle loans and credit cards, are essentially fixed. These are the expenses that you can’t simply cut out. If your income doesn’t outweigh your expenses, a good budget can help you reach a more comfortable position. It won’t happen quickly, but you might refinance a loan for a better rate, cut back on utility usage, and even negotiate for reduced interest on credit cards.
Calculate Non-Essential Expenses
Anything that you don’t have to spend is non-essential. Dining out, vacations, sending a bit of money to help out a grandson in college, and new landscaping are all expenses that you can change if need be. This is the most challenging part of creating a budget, since non-essentials are sometimes difficult to track, and surprising once you add them up.
Start Saving Money
Savings aren’t just for people who are planning for retirement years in the future. Everyone needs a safety net. The money saved from cutting expenses can provide security to cover the unexpected such as a plumbing leak, vehicle repair, broken window, or sprained thumb.
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