My finances are not in a very healthy state but this is my day to day life and the consequences of not being prepared. Nobody expects their lives to take a turn for the worst, but you must prepare yourself for that possibility. This is the result of not having all your ducks in a row.
I am new to the game of finance, but I take my share of the blame because I frankly did not want to deal with money when my husband was alive. So now I am taking on my share of the responsibilities. I know enough that I know these percentages are not healthy, but at this point I am just trying to learn.
I am still paying a mortgage. The total of my mortgage, property taxes, house insurance, and payments on a new furnace accounts for just under 50% of my pension.
Utilities account for 20%
Debt repayment accounts for 16%
Household and car expenses use roughly 13%
And if you have been adding that up, I have already spent approximately 99%, so that leaves maybe 1% for savings....sometimes more or less, depending on how much less I had to pay on my utilities.
Because of the amount of pension I receive, I qualify for some government assistance., which I do not count as income. One small cheque arrives monthly, which is earmarked for gifts. Another slightly bigger cheque arrives quarterly, which is earmarked for savings. If I do not need to rob my savings account for those "surprise expenses", I take a chunk of it every so often to dump into debt repayment.
I need to look at my budget at the beginning of every month to find extra savings so I can figure out how much I can put in my savings account first. I am not really "paying myself first", but rather figuring out what is left over, so that I can put it into the savings account so it isn't as easily accessible. If I miscalculate, or there is a surprise expense I didn't see coming, that money is sometimes taken back out before the end of the month, but there is a little bit of cushion. Also, last month I started going to my bank once at the first of the month to physically remove the cash that I allocate for household and car expenses. That way I see exactly what is left. This month I still have not got my final tally for my Hydro and some unexpected charges, so I still do not know if there will be much if anything to go into savings for the month of February. March is looking more promising.
You are not the only one that has arrived at this time of life not prepared as one would like. I am 62, do not own a home, have been divorced for many years and hope to retire soon. I have been too afraid to even talk to my HR dept to see if or when I might be able to retire. I have enough years of service for years worked here to retire but then what would do about insurance (so very important) and how to live on less money than I have now. I have a couple of friends that ended up going back to work at low paying jobs after retire to just get their insurance paid since it was so expensive. (Living in the US) I am still hiding my head in the sand and thinking I will get around to checking on this one of these days but that day isn't going to be today.
ReplyDeleteYou are now taking a hard look at your budget/expenses and that is still better than not doing anything about it. Congratulation to you for taking this first step!!!
Diana
Diana, if I may add my two cents, I second Susan (Susan, I hope you don't mind me jumping in!) and encourage you to speak with HR. I am not a financial expert, but, like you, I live in the U.S., have been divorced for years, recently turned 63, and retired last October, after 35 years of service.
DeleteYou don't have to answer any of these following questions, but these are questions I'd encourage you to consider: Does your employer have a retirement plan for employees, does it include medical insurance, or do you qualify for Social Security/Medicare? If so, how much would you receive in retirement pay or Social Security? Do you have any other personal retirement accounts (IRAs, etc.) or savings?
Once you have an idea of how much you might receive once you retire, compare that to your current living expenses. Can you manage to live on it? Better yet, try living on that amount for 6 months or 1 year (and save the rest of your income as a nest egg). Yes, that is what I did.
Thank you Diana. I do encourage you to talk to HR to see where you stand. After talking with my department, I jumped at the chance to take early retirement at the age of 60. My husband was ill and forced into early retirement. I didn't know how much time I had left with him. The downfall of taking early retirement was a reduced government retirement pension. If I waited until 65, my CPP (Canadian Pension Plan) would have been higher. My workplace was downsizing, so offered to buy me out, which was a whole year's salary. Half of that went into my workplace pension to increase those monthly benefits. The other half of the buyout was invested through my bank to provide me with a "bridge" allowance that would take me to the age of 65 when my government Old Age Security kicked in. I have the added benefit of having universal health care living in Canada. Also, I was given the option of paying to stay with my workplace insurance for extended healthcare benefits. When my husband passed, I was also allowed to buy into his, so I have benefits for eyeglasses, dental and prescription medicine. You are so very right about health insurance. As you get older, it will become paramount to have good health benefits. Good luck to you.
ReplyDeleteAs Diana said, you are taking responsibility for your budget now, and that is what is important. You start where you are (as Arthur Ashe said) and go from there.
ReplyDeleteOn the positive side, you are managing to live within your means and still saving, even if it is only the quarterly check. I'm very glad to see that you earmark that quarterly check towards savings.
But, I can see that it is a very tight budget, with much of it being more or less fixed expenses (mortgage, property taxes, etc.). Even home insurance, once you've shopped around for the lowest rates, becomes a fixed expense and there is only so much one can do to cut back on utilities, so, that's a fixed expense, too.
That debt repayment is a bit worrisome, but, you are taking steps to pay it off by taking from savings, periodically, to pay it down.
All in all, I think you are doing the best you can, Susan. I hope February works out well and March is better.
Yes that quarterly cheque goes into savings, as well as any I have left after holding out what I need to pay the bills each month. As soon as I know what I need to keep in the chequing account, and after I remove the cash for household expenses and gas to take home with me, I transfer the remainder into my savings account, and hope I won't need to remove any of it before the month is over. During the summer months, I can save more on my hydro utilities and perhaps more on fresh veggies (I hope). My budget IS very tight right now, but I CAN squirrel away some money as well.
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