10 Things Fixed-Income Retirees Can Do Right Now To Eliminate Financial Stress

For retirees living on a fixed income, while you might have more leisure time at this stage of life, it can be difficult if you don’t have enough funds to make your retirement feel easy in other ways. 

Lots of things can contribute to financial stress at this stage of life, reducing your ability to enjoy your increased down time.

Joel Callagan, CFP and vice president at Wealth Enhancement Group, said he’s seeing retirees struggling with the after-effects of inflation. “Just because inflation’s coming down doesn’t mean that families are feeling the effects. When I’m talking to someone who’s retired on a fixed income, it doesn’t matter to them what’s happened in a national scale. They’re focused on the day to day and surviving.”

Instead of worrying, however, Callagan and Annie Cole, a money coach and founder of Money Essentials, explain some things you can do to eliminate this stress.

Cole said thata major way she helps her clients with financial stress is by creating a financial plan.

“The number one thing I would say if you’re in that situation would be to just create, at minimum, a budget of your expenses and your income. I know that sounds so simple, but so many people don’t actually have a budget and they’re just checking their bank account once a month or just spending and they don’t have a plan,” she said.

Callagan agreed, calling it a “cashflow analysis,” in which you look at all sources of money coming in, including wages, Social Security, pensions and any retirement minimum distributions from retirement accounts and then all your bills and expenditures.

Having a plan enables people on a fixed income to absorb the costs of unexpected expenses. “An unexpected expense can really cripple someone’s budget,” Callagan said.

This can range from things like medical bills to a broken appliance or car repair. “Say you get rear-ended by an uninsured driver,” he said.

Additionally, he pointed out that a lot of people don’t know that Medicare doesn’t cover dental or vision. “So eye problems or dental work can easily add up,” he said.

Also, though not necessarily unexpected, he urged retirees not to forget about things that don’t happen monthly, such as property taxes.

Spending more money than you want to or have is extremely stressful, so Cole always starts by recommending an audit of your expenses.

“A lot of times it’s things that we forget about [that you can cut]. You’ve had the same cable bill forever and it’s $150 a month, but there’s a better offer and you haven’t changed it in five years, or you’re paying for a cellphone bill and you have too many minutes and you don’t actually need that much,” she said. 

As important as a budget is, Callagan acknowledged that sometimes budgeting can cause more stress if it’s too inflexible, because, for example, one month you might need to shop at a bulk store like Costco or Sam’s Club for items you won’t buy the next month, or similar.

“I find the more you try to drill down to create a fine budget with all these different categories, that creates a lot of stress and panic because no month’s the same. Humans don’t live their lives in spreadsheets. So giving yourself some grace […] will help avoid the stress,” he said.

Cole knows that cutting expenses can also sometimes create its own kind of stress. She offered, “If it feels really sad to go into your budget and cut a bunch of things, one way that you can feel more empowered is to ask yourself ‘What’s possible here?’ To think about it from more of an empowered standpoint of all the choices you have and the possibilities you have, rather than saying, ‘I have to cut this out.’ It’s a very simple switch, but it just makes it more of something that you’re in control of rather than feeling like something else is controlling you.”

Another important step in reducing stress and saving money, Cole said, is “to fall in love with things that are free.” 

“I highly encourage folks to take breaks where they give something up for a month or for a week and then they also create a list of things that they would love to do that are free. The more we can surround our life with things that bring us happiness, that don’t cost a lot of money, we might find that we just drop off those other expenses anyway because we don’t need them anymore to bring us happiness.”

This could be as simple as replacing purchased books with the library or enjoying a walk in the park instead of a gym membership. 

If you’re using your credit cards responsibly, paying them off each month, remember to take advantage of credit card rewards, Callagan said. “Track what credit cards you sign up for, as there are significant bonuses out there, and especially if you’re on a fixed budget, that can go a long way.” 

Banks also offer ways to get “free money,” Cole pointed out. “So if you are already buying something, have a credit card that’s giving you cash back and put extra cash into a high-yield savings account or a certificate of deposit. Don’t keep it in a regular savings account because you’re just giving up free interest on your money.”

Callagan also urged retirees to make use of available community and government resources for seniors, whether that discounted rates on the Affordable Care Act, affordable housing or discounts on everyday purchases at your grocery store or movie theater.

He also pointed out, “There’s a lot of consumption in this world, but there’s also a lot of quality used goods out there where you can get items for a significant discount.”

If you’re looking for ways to reduce stress through bringing in more income, Cole recommended really assessing your knowledge and experience from your working days and seeing if you can turn that into a side gig, such as freelance work or consulting. 

“Also, leverage your network. Maybe you get on LinkedIn and just say, ‘Hey, I have expertise in [blank] and I’m looking for folks who need support in that area.’ You might find a three-month contract with a business or maybe connect with some other people who want to do coaching with you,” Cole said.

Lastly, Callagan emphasized the importance of having someone you can bounce financial decisions off of, be that a partner, a kid, neighbors or an advisor. “When you’re making these types of decisions yourself and you’re in a retirement where there’s no steady source of income coming in, that creates a lot of stress. And as we see in all types of life, the more stress you’re under, the worst decisions you make.”Having a sounding board can help you make better decisions and reduce stress.