The cost-of-living adjustment for Social Security in January 2022 was 5.9%, the highest rate in 40 years. Due to the increasing cost of goods and services, the percentage increased. The cost-of-living adjustment aims to help retirees support themselves when inflation hits grocery store shelves, gas stations, and housing markets, among other places.
In times of rising prices, living on a fixed income can still be difficult, even with increased Social Security benefits. There is also concern about the future, as inflation rates are unsure whether or not they will continue to rise. In situations like this, you may be looking for ways to cope and survive.
In light of the changing price environment, here are some strategies to consider.
Look for Spending Patterns
Take the time to examine all of your bank and credit card statements from the past three to six months instead of what you spent in the last two weeks. Keep a record of all the money you have spent. According to Matthew Benson, financial planner and owner of Sonmore Financial in Chandler, Arizona, the farther you go, the better because you will have more data and can get a more accurate idea of average monthly expenses. The increase can be evaluated over time by seeing if your expenses have trended upward over the last few months. Using this method, you can estimate how inflation has affected your total payments.
Make an in-depth analysis of your budget
Consider your fixed and variable expenses. From month to month, fixed costs are relatively consistent. Examples include rent or mortgage, utilities, phone bills, cable payments, and insurance expenses. Variable costs change over time, like groceries and eating out. Additionally, they include entertainment, hobbies, and clothing.
The last month’s fixed and variable expenses should be added up. Deduct them from your monthly income. Negative numbers indicate deficits, while positive numbers indicate surplus. You may be able to reduce or cut your variable expenses for budgets that are in the red. If you find you have extra money, put it into an emergency fund or pay off debt.
Major expenses should be postponed
Postpone your extended vacation if you haven’t paid for it yet. The same applies to luxury purchases like boats and home renovations. Consider putting these funds toward day-to-day expenses if you’re struggling to meet ends.
Draw on cash
Spending cash instead of selling off stocks or withdrawing money from retirement accounts may be a better option for those with access to cash. Pay attention to every expense when using cash to cover expenses. In these uncertain times, you might be able to stretch your dollars.
Review the logistics of moving
A home you own and the mortgage has been paid off or is close to being paid off will have accumulated equity. You might consider selling your home, and relocating to a less expensive area might be possible in areas where housing prices are rising. Think about your lifestyle in a new place and research cities known for being affordable retirement destinations.
Downsizing Impacts
Smaller homes might help reduce expenses for those who wish to stay in their hometown. Find retirement communities or condominium communities near supermarkets and services that cater to retirees. The possibility that you could sell your current residence and some of the furniture that will not fit in the new one. You can set aside the proceeds if inflation continues to cover current expenses.
Make sure your portfolio is up to date
Suppose you have invested funds in different accounts and products in your working years. You may find it helpful to see how your funds are diversified now that you’re living off your nest egg.
Inflationary periods can be difficult to predict. Over time, inflation tends to ebb and flow despite some estimates made by experts. You can continue living off your fixed income by taking measures now.