There are different reasons you might be on a fixed income. For example, you might receive disability payments, or you could be retired.
Regardless of the specifics of your situation, being on a fixed income can be challenging as far as budgeting and money management but not impossible.
If you're on a fixed income, consider the following personal finance tips.
Create a Budget
It sounds so simple to say that you should create a budget, but even with its simplicity, it's something many people don't do, including when they're on a fixed income.
To create a budget, start by writing down how much your monthly income is. That's fairly easy if you have a fixed income.
Make sure you integrate income from all sources, including your retirement savings, government programs, and pension. Then, write out your fixed monthly expenses that are the same every month.
Once you have those two components mapped out, you can see what's left for variable spending and extras.
When you're on a fixed income, if you do the math and find that you don't have the money left that you'd like for discretionary spending, you can do one of two things-find a way to increase your income or cut your expenses.
Of course, you can do both as well.
If you're starting by lowering your monthly expenses, there are different specific strategies you can take.
You can reduce your housing costs because, for many people, this is their highest fixed cost.
You might downsize to a smaller home and if that saves you a few hundred dollars a month, it's a big difference in your budget.
You might also want to move somewhere that has a lower cost of living and lower taxes.
If you're on a fixed income, try to eliminate as much debt as you can. Create a strategy as part of your budget to eliminate debt, starting with the most expensive debt first.
When you're on a fixed income, one of the last things you should do financially is use a credit card because the interest will eat up a lot of your budget.
Another big expense that you might be able to reduce is your transportation costs.
If you have a newer car, trade it for an older car, for example.
If you're on a fixed income and you stay home, there are ways you can still make a side income.
Before you focus on making more money, do be aware that having SSDI benefits do mean that you may face income restrictions, so ensure that you don't make so much that you lose those.
If you're retired, this may be less of an issue, although in some cases, still something to think about.
There are many options to work from home and earn extra income. For example, if you have any specific skills, you might want to be a freelancer in that area. You might also be able to find work as a customer service rep from home or a virtual assistant.
Some other personal finance tips if you're on a fixed income include:
- Create a consolidated financial calendar. This will be where you can write down payments that you're going to receive and also payments you have due. This will help you avoid late fees and help you have more control over your finances.
- Be strategic when you pay off debt. You want to pay off the debt with the highest interest rates first in almost all cases.
- There's one tip that you can follow which is to take a minute out of your day everyday to check out your finances and see how they're looking.
- Set specific financial goals for yourself because you'll be more likely to achieve them.
- When you're setting financial goals, make them small enough that you can achieve them, which will then help make sure that you feel positive about your financial situation.
- Cut out bad habits. Many of the things that we spend the most on in terms of discretionary spending also happen to be not great for our physical and mental health, so try and find places you can eliminate these and boost your health in the meantime.
When you feel like you're struggling because you're on a fixed income, work to adjust your mindset. Change how you view your financial situation and take back control so you can make positive, realistic changes.