We’re are concerned about keeping our finances strong and hope to retire with enough money to be happy and healthy. This may not be easy, especially for our senior loved ones who have not been putting away enough for retirement or survive hits such as those from health issues or downturns in the economy.
Our own financial condition can weigh on us, certainly, but theirs can be as stressful on us as our own at times, or even more, especially if we feel frustration from lack of control over the situation but see ourselves as being in the role of their safety net.
Sometimes our help can come in the form of financial management assistance for our senior loved ones. This can be tricky, though, because involving children or grandchildren in financial planning is difficult or embarrassing for many, especially if finances are strained. The process may be a challenge on both sides, but one that can reduce the burden on all when completed.
Financial Management Tips
Know the actual situation Learn how much money is available, where the money is coming from, and where it goes each month. Knowing and tracking your senior’s expenses and income will help them stay on a strong path. Write down the information you gather to most effectively keep track. List the expenses of your senior that are fixed, such as rent, mortgage, insurance premiums or a car loan. Be sure to include expenses that are variable, such as food or non-essential spending. Use your senior love one’s various statements to help you remember what was spent, such as utilities, credit cards, bank records and other statements or bills.
Budget Once you know all your senior’s expenses and income, work with them to set up a budget. Many people may not like thinking they are on a budget, but it can be helpful in identifying which expenses are practical or doable and which are not. Looking at the information you tracked in the first step, calculate the income versus the expenses. Is there any money left or not enough to pay all the expenses? When you arrive at this number, what adjustments need to be made? Will there be items in the budget that should be eliminated or money left over to save for something special or put toward debt?
“A budget tells us what we can’t afford, but it doesn’t keep us from buying it.” –William Feather
Retire debt If your senior is getting ready to retire or has recently retired, it may be time to retire consumer debt too. If a significant share of a senior’s income goes directly to credit card bills or loans and they can only make the minimum payment each month, it is time to take action. When you created the budget in step 2, was there extra money which could be used to pay off more on the credit cards? The sooner you can pay off the debt you have, the less interest you will have to pay over time. While you are paying off your credit cards, try to use cash so that you won’t be adding to the credit debt. Pay off the credit card with the greatest rate first.
Set up reserves Plan for emergencies by suggesting they assure they have readily available enough money to cover expenses for six months (their monthly budget times six). This fund can be used for out-of-the-ordinary expenses, such as those required for repairs, accidents or illnesses, or other unforeseen expenses. The key is making sure the funds are readily accessible; if it is tied up in an asset or mutual fund, for example, it won’t be easy to use in an emergency.
Plan legacies If your senior’s goal is to leave a legacy then having a careful plan with a specific goal will help them achieve it. Help them set a realistic goal, one that is achievable based on their monthly budget and the expenses you determined to be essential.
Consider annuities Some find safety in a lifetime fixed annuity to assure a regular cash flow. Before they do, help them make sure it is one that meets their needs, as the offerings of different companies (and the quality of the companies themselves) can vary significantly. This is one area where professional advice, from an adviser paid a fee rather than working on commissions, can help in avoiding costly mistakes.
Continue saving If your senior loved one is still working, suggest they join the 401K plan and begin contributions or contribute to their own retirement plan.
Diversify If they have stock and bond investments already, they should be diversified. Help them assure their portfolio is not exposed to more risk than they find comfortable.
Insure Protect your seniors’ health into their golden years by investigating the possibility of getting long term care insurance. Learn as much as you can about what is covered, what benefits could be obtained and discuss it together with a professional.
If you and your senior loved one would like more information on how to create a plan to manage their finances, there are abundant worksheets, more tips and online calculators to help you make a sound plan. You can pay for packages but many good ones are available free of charge.
Do you have more tips to share with other family caregivers to help them protect senior’s finances? We would love to hear from you.