How to Live on a Budget

When your monthly spending starts to dwarf your paltry retirement income, it is time to start thinking about how to live on a budget. You need to make sure your hard earned nest egg will last until you and any significant other hits the end of the road. Sure it would be nice to leave a little something to the kids, but they all have jobs for the most part and aren’t living on a fixed income like you.

There are three ways to adjust your budget. You can 1) increase your income, 2) increase your debt, or 3) cut back on your spending.

Unless you hit the Powerball, increasing your income in a meaningful way is a challenge. There is always the possibility of raising some pocket money doing odd jobs, driving for Uber, or taking on some other kind of side hustle. But let’s face it. Being a greeter at Walmart is not going to provide the financial shot in the arm you need to maintain the lifestyle you deserve. You could also attempt to increase your net worth by placing a few big bets on the stock market or better yet, in cryptocurrency. That’s only slightly more risky than putting it all on the long shot at Belmont.

Another way to turbo charge your spending power is to load up on credit cards. Credit card companies generally don’t care how many cards you have as long as the collection includes theirs. You can even move balances around between cards in a game of musical chairs that works fine until the music stops.

Maxing out your credit cards may seem like a short-term fix, but remember, the federal government, no stranger to a budget crisis, has been running on debt for as long as anyone can remember. So why shouldn’t you? Well for starters, the federal government can borrow money indefinitely and you can’t. If the government hits its credit limit, known as the debt ceiling, they simply vote to raise it. When it comes to raising your credit limit, you don’t get a vote.

Finally, there is the option of just living within your means. At first glance, this may seem totally out of the questions, but it should be part of everyone’s budgetary get-well plan. Painful as it may be, you will have to focus on the spending side of the equation to make your budget work.

Economists have a term for all the money you have after federal, state and local governments take their piece of the action. It’s called disposable income. Disposable income is like disposable diapers in that it never lasts as long as you would hope.

Disposable income can be disposed of in a number of ways. Economists recommend prioritizing essentials like food and shelter. That’s why economists tend to be pretty boring. Economists also recommend setting aside a certain amount of disposable income toward savings. Also boring.

Once you have taken care of life’s essentials, what you do with the rest is called discretionary spending. The interesting thing about discretionary spending is that it is usually anything but. As Americans, we are not too discreet about anything, but that is especially true when it some to spending money. Discretionary spending includes all the sports cars, yachts, vacation homes, smart watches and other stuff you can’t live without.

Retirement planners say there are many ways you can manage the lifestyle you clearly can’t afford.

Reduce your life expectancy. You can’t outlive your money if you don’t live too long. Immortality is not what it’s cracked up to be anyway.

Update your will. When it comes to heirs, it should be every man for himself, unless you happen to have a trust fund.

Sell the family heirlooms. This tried and true technique has worked for England’s cash-starved gentry for centuries. If you don’t happen to have any heirlooms, just look for anything else sitting around waiting to be turned into cash.

Defer or eliminate large purchases. This could include your kids’ education, health insurance, most home renovations and assisted living expenses.

Cut out unnecessary travel. This would include all class reunions, weddings, funerals, and European vacations unless the exchange rate is favorable. Exceptions to the rule would be golf trips, beach vacations, ski vacations and spa getaways.

Good luck living on a budget!