Budgeting is hard for everyone, especially those who are living on a fixed income. It is becoming increasingly common for seniors to struggle financially after retiring, since many rely solely on social security benefits and meager savings to make ends meet. Even if an elder has been prudent and fortunate enough to amass significant savings for retirement, these funds must be managed carefully to ensure they last.
Discussing Finances with Aging Parents
For adult children, talking to aging parents about money can be a challenge. The biggest issue is that we didn’t perform the years of hard work needed to earn these funds, so who are we to suggest or dictate how it should be saved or spent? Broaching this topic is often uncomfortable at first, but your approach can make or break the conversation. Avoid being critical or condescending and emphasize the fact that you have their best interest at heart.
The goal is to foster trust, open communication and teamwork, but even the most respectful attempts at discussing finances can result in a parent feeling like the victim of a hostile takeover. At the end of the day, if a resistant elder is still of sound mind and has not fallen victim to undue influence or financial elder abuse, then they have every right to manage their finances however they want. This can be a frustrating thing to accept, but a family caregiver’s only recourse is to gently encourage smarter financial decisions and carefully monitor the situation from afar.
How to Help Your Parent Create and Stick to a Budget
If your aging loved one is open to using new strategies to reduce their expenses and make their money go further, implement some of the following tips:
- Prepare an expense worksheet. The first step most financial planners recommend is filling out an expense worksheet that includes all your loved one’s monthly income and expenses. This will provide you with a good handle on their expenditures and help you identify which areas, if any, need to be pared back. If there is a deficit in monthly income, the ensuing suggestions can help minimize the discrepancy.
Download a sample expense worksheet here.
- Reduce utility costs. Contact your loved one’s utility companies to see if they offer a monthly budget plan, which keeps their bill the same amount every month. Instead of paying higher monthly bills during certain times of year due to increased energy usage for heating or air conditioning, the cost is spread more evenly over 12 months.
- Choose insurance premium payment plans wisely. Insurance premiums can be paid on a variety of installment plans, such as monthly or quarterly, versus annually. Depending on your loved one’s cash flow situation, it might be more cost-effective to pay premiums on a monthly basis, rather than in one large lump sum for the year. Some insurance companies even offer discounts associated with certain payment plans.
- Take advantage of financial programs and resources. If your loved one owns a home, there may be savings available to them if they meet certain eligibility requirements. For example, New York state offers the STAR Program to help seniors and individuals in certain income brackets reduce the amounts owed for property taxes. Visit Benefits.gov to see if your loved one is eligible for any other local, state or federal assistance or discount programs. You can also check with your Area Agency on Aging (AAA) for additional resources, guidance and assistance with benefits applications.
- Control credit card debt. If mounting credit card debt is an issue, it may help your loved one to use a debit card instead. This way they have a finite amount of money at their disposal and the connected account can be replenished every month. This is just one of several credit card strategies for retirees.
- Look for telecommunications bundles. Telecom companies usually offer cable, internet, and home and/or cellular phone services in bundles or packages that are cheaper than paying for each service individually. Inquire about package deals, discounts and introductory offers.
- Create a financial system. Making a budget doesn’t do a senior much good if they don’t follow it and monitor their progress. Some seniors simply aren’t good at restricting their spending or paying bills on time. Others aren’t interested in goal-setting or seeing how much money they were able to save from month to month. If your loved one is of sound mind but isn’t keen on taking a hands-on approach to their own financial situation, then it may be time to step in.
It’s important for every senior to designate a trustworthy person as financial power of attorney (POA) should they ever become unable to make sound financial decisions for themselves. POA allows this person to act on the elder’s behalf in a financial capacity. A POA document can become effective immediately or upon the elder’s incapacitation and can be limited to certain functions or be broad enough to cover all financial actions. Financial advisors usually recommend that a family member be given financial POA. However, if the family can’t decide who to name, we advise hiring a daily money manager. Their services meet a variety of needs, including organizing and keeping track of financial paperwork, writing checks, paying bills, budgeting and maintaining bank accounts.