Wednesday, 3 June 2020

A Grandparent's Guide To Managing Money

There are many odd stereotypes about those of us over 60 that have never really rung true. One of
which is that we’re all inexplicably wealthy. The assumption, of course, is that by the time
we reach retirement age we’ve all paid off our mortgages, acquired significant savings and
have our pensions to cover our basic living expenses. And while this is a charming fantasy,
it doesn’t quite measure up to the real-life experiences of many pension aged people in Scotland
and all over the UK. Around 3 million Brits over the age of 60 are still paying off their mortgages.
The past few decades have not been kind to ,any of us financially, and even if you’ve owned your
home for decades, you may have had to refinance to free up more spending money. Combine
this with the increasingly challenging cost of living (particularly in Scotland) and it goes a long
way towards shattering the stereotype of the infinitely wealthy pensioner. 

Of course, as grandparents we want to be able to support our grown up kids and treat
our grandchildren whenever we can. We want to be able to enjoy the odd indulgence
without worrying how it’ll affect our ability to pay our bills. But the sad truth is that almost a
million people over 65 in the UK are just one bill away from financial ruin.

If you’re recently retired you may have all sorts of money questions. Retirement, after all,
doesn’t come with a manual. But it’s how you’ll spend roughly 25% of your life. So, let’s take a
look at some money management tips for retirees...

It begins with budgeting

It’s impossible to make the most of your money without a budget. Only when you can account
for every penny going into and out of your bank account can you take control of your finances
and free yourself from the feelings of worry, stress and dread that money can bring up in so
many of us. Budgeting is a skill, and like any other skill, it needs to be learned and developed.
The truth, however, is that many of today’s pensioners have gone through life without needing
to master this skill. Many of us have earned decent money and grew up at a time when the
basics were relatively affordable. And since the ‘60s we’ve had easy access to credit cards
and unsecured loans to make up the shortfall when our spending exceeds our income. 

If your only source of income is your state pension, however, you’ll need to work a little harder
to address the balance. Use a budget template to track where your money is coming from
and where it’s going. Here are some digital templates you can use, or print out if you prefer
to keep it all on paper. They’ll make it easier for you to identify areas where your money is
slipping through the cracks. Very rarely is it the big, flashy purchases that erode your finances.
It’s the little expenses that add up a great deal by the end of the month.

If your only source of income is your state pension, you’re left with a maximum of £168.60 a
week (or £8,750 a year) to cover your expenses. However, there may be other benefits for
which you’re eligible. Age UK has a comprehensive list of benefits for those with low incomes
and / or of retirement age. It’s much easier to balance your budget when you take advantage
of everything that’s available to you. 

Remember: Goals are important at all stages of life

It’s hard to stick to your budget when you’re lacking in motivation. And it’s hard to stay
motivated when you don’t have clear goals and things to anticipate and look forward to.
These are your golden years, after all, and you’ve worked hard all your life to enjoy them.
So start thinking now about how you want to spend this part of your life, and start putting a plan
in place to make it happen. 

You may decide that you’d like to live out your days being treated like royalty in the company of
your peers. If so, you might want to look into the cost and logistics of moving into one of these
luxury retirement villages. Or, if you decide that now’s the time to see the world, you might want
to look in to a cruise (once the pandemic has died down and people feel safe to travel once again,
of course). Alternatively, you might want to save for something like a new car. There are no wrong
answers, but it’s important to have goals. 

Getting your debts under control 

It’s extremely hard to balance your household budget when you have debt placing a
stranglehold on your cash flow. For many Brits of all ages, debt is just another unpleasant fact of
life like drizzle or constipation… but that doesn’t mean we have to let it ruin our best days.
Many of us are paying far too much in interest on our credit cards, loans, store cards etc. And
when we let our debts pile up, they can become much harder and more stressful to manage.
The good news is that there are lots of ways to keep debts under control and claw back a
surprising amount of money every month that might otherwise have been lost to interest payments. 

Keep moving credit card debt to a new card with a better rate of interest. You’ll be charged a fee
but this will be absorbed into your debt and will pale in comparison to what you save. Or, if
your payments have become harder to manage, you might benefit from a consolidation loan
that condenses them down into a single, manageable monthly repayment with a much lower
interest. If your credit score prohibits one of these, however, you might benefit from arranging
an IVA or Individual Voluntary Arrangement with your creditors. You might be able to waive
interest altogether and substantially reduce your monthly expenses while paying your debts
off faster. 

You’re never the wrong age to take control of your finances and start thinking about what you want
to do with your money. It’s time to stop worrying and start enjoying the best years of your life!  

This is a collaborative post.

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