iCare Community Magazine
How to Put an Elderly Loved One on A Budget
Budgeting is hard for everyone, particularly 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, especially given the rising costs of long-term care.
According to the Genworth Cost of Care Survey 2019, the median cost of elder care services can range from $1,625 per month for adult day health care to $8,517 per month for a private room in a nursing home. Aging parents may not anticipate ever needing to pay for elder care, but according to LongTermCare.gov, someone turning 65 today has a nearly 70 percent chance of needing some type of long-term care services and supports in their lifetime.
Carefully planning for current and future expenses now will help ensure your parents do not outlive their funds and will be able to receive the care they need.
Discussing Budgeting With Aging Parents
For adult children, talking to aging parents about money can be a challenge. At the heart of the issue is the fact 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.
Tips for Budgeting for Seniors
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.
Create a Monthly 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.
Reduce Utility Costs
Contact your loved one’s utility companies to see if they offer a monthly budget-billing 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.
Predictable expenses make it easier to follow a set budget that does not fluctuate throughout the year.
Choose Insurance Premium Payment Plans Wisely
Insurance premiums can be paid on a variety of installment plans, such as monthly, quarterly or semi-annually. Depending on your loved one’s cash flow, it might be more feasible to pay premiums in installments, rather than in one large lump sum for the year. However, some insurance companies offer discounts for customers who pay in full. Paying annual premiums for auto insurance, health insurance, homeowners insurance and life insurance involves large outlays up front, but this is often the least expensive option.
Look for Senior Savings Programs and Government Benefits
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 School Tax Relief (STAR) program to help senior homeowners in certain income brackets reduce the amounts owed for property taxes. Visit Benefits.gov to see if your elderly loved one is eligible for any local, state or federal assistance or discount programs.
Benefits like housing assistance, Supplemental Nutrition Assistance Programs (food stamps) and energy assistance can help minimize expenses for low-income seniors. 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 cash or a debit card instead. This way they have a finite amount of money at their disposal to keep spending in check.
With a debit card, the connected account can be replenished every month. This is just one of several beneficial 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, senior discounts and introductory offers to minimize costs.
Just be sure to avoid bundles that include services your loved one doesn’t want or need.
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 offer some help.
It’s important for every senior to designate a trustworthy person as their durable financial power of attorney (POA). If an elder is ever unable to make sound financial decisions for themselves, a POA document allows this person to act on their 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 a senior 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 managing bank accounts.