Adapting to Frugal Living: A Guide for New Retirees
Written by
Nicole Spector
Edited by
Elizabeth Constantineau
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You may spend years anticipating the day when you finally bid adieu to the hustle and retire. Perhaps you’ve planned meticulously and know exactly where you want to live and how you will manage our new expanse of free time. Maybe you even feel confident about how much you have saved for retirement.
But are you fully prepared for the financial adjustment retirement brings? Even if you’ve successfully saved for retirement, it’s likely that you’ll have to shift to a more frugal lifestyle once retired. How can you adapt to this major change and cut down on expenses without sacrificing joy?
Here’s what new retirees should do to best adapt to frugal living. Also see retirement moves frugal people never make.
Assess Your Financial Health
First things first: You need to know exactly where you stand financially. Do a thorough inventory to assess your status.
“This includes [looking at] income sources — pensions, investments, Social Security — regular expenses, debts and savings,” said Andrew Latham, CFP and managing editor at SuperMoney.com. “Understanding the financial baseline is crucial for effective budgeting.”
Create a Realistic Budget
You may already be used to budgeting — which is great — but have you revamped your budget to make it retirement friendly? You need to do this.
“Develop a budget that reflects current income and necessary expenses,” Latham said. “Prioritize essentials like housing, healthcare and groceries. Tools like budgeting apps or spreadsheets can be helpful. Remember, a budget is a living document and should be reviewed regularly.”
If you’re somewhat new to budgeting, consider which method you will use to keep your finances in order.
“Retirees should consider adopting a specific budget formula, like the 50/30/20 rule, to help keep you on track financially,” said Samantha Landau, consumer expert at TopCashback USA. “With this particular budgeting technique, allocate 50% of after-tax income to necessities like rent, utilities and food; 30% to personal expenses such as dining out and activities; and reserve 20% for financial obligations such as debt repayment and savings.
“You can also adjust these percentages based on your unique lifestyle and financial priorities,” Landau said. “What’s most important is that you are reviewing your finances and planning out your spending on a regular basis to ensure your financial security through retirement — regardless of how you decide to budget.”
Reduce Food Waste
“Grocery prices skyrocketed during inflation and have yet to come back down,” said budgeting expert Andrea Woroch. “If you aren’t paying attention to your grocery spend and shopping strategies, you’re likely wasting money on food in the form of tossed leftovers and spoiled produce.”
To avoid food waste (which is ultimately a money waste), spend a little extra time prepping and planning meals.
“This is one of those frugal habits that doesn’t impact your daily life or require any major sacrifice,” Woroch said. “In fact, it just requires a little bit of extra planning. Having a meal plan also ensures you have everything you need to make a favorite meal to reduce the temptation of ordering take out.”
Reduce Housing Costs
If you live in a large house in a popular city, it may be time to consider getting a smaller place and/or relocating to a cheaper city.
“If housing costs are high, consider downsizing, relocating to a more affordable area or exploring reverse mortgages,” Latham said. “Shared housing or co-living spaces can also be economical options.”
Embrace Energy Efficiency
The cost of energy is on the rise, but you can make small and simple moves to take less of a financial hit from those bills.
“Reducing utility bills can be achieved by implementing energy-efficient practices at home,” Latham said. “This includes using LED lighting, fixing leaks and managing thermostat settings efficiently.”
Find Low-Cost or Free Social Activities and Entertainment
You may be used to paying for a night out on the town or frequently splurging on brunch and dinner. While you may not have to cut back entirely on social events, you should make some effort to reduce costs here, too.
“Look for free or low-cost community events, join local clubs or groups that align with your interests, and make use of public resources like libraries and parks for entertainment and socializing,” Latham said.
Seek Senior-Friendly Programs and Discounts
Melissa Berry, founder at Everyday Spokane, told GOBankingRates that her mother recently retired and realized she needed to adapt to some frugal living habits to stretch her retirement income. One of the best moves she has made is embracing senior discounts.
“From senior sale days at grocery stores to Silver Sneaker fitness discounts, there are so many ways for seniors to save on things they love,” Berry said. “My mom particularly likes the Silver Sneakers program, which gives her access to gyms all over the U.S. for free. They also offer live and in-person fitness classes, like Tai Chi, strength and balance classes, and more.”
Keep Saving for Emergencies
As you get used to frugal living in retirement and start saving money, you should be diligent with how you allocate your new savings. Don’t let that emergency fund run out!
“If you don’t have an emergency fund or it’s not well funded, prioritizing this savings goal in the new year is key to protecting your retirement income,” Woroch said. “Unexpected medical bills, home repairs and other emergencies can deplete your bank account and rack up your credit card bill if you aren’t prepared. But saving each month to a separate account is a frugal habit that can keep you and your money safe.”
Don’t Expect To Adapt to Frugal Living Overnight
Be kind to yourself and bear in mind that fully adapting to frugal living won’t happen instantaneously. In light of this, you should implement changes gradually to make the transition to frugal living feel more feasible.
Finally, you should never mistake frugality for joylessness.
“Frugal living should not mean sacrificing quality of life,” Latham said. “Find a balance between saving money and enjoying retirement.”
