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Currently 2/3 of Americans retire on less than $10,000. Many older workers are being forced into retirement through layoffs or early retirement buyouts. If you are 50 and broke, you need to take the following action:

Set a Budget Now!

Set a budget. If you have a set budget and follow it, congratulations! However, if you haven’t, the time is now. It doesn’t have to be an arduous affair where every penny is scrutinized and you nightly have a dinner of bread and beans. Set general budget categories and set aside money for those of those categories such as mortgage, food, entertainment, clothes, utilities, etc.

For example, if your car is paid off, set aside funds for maintenance, insurance and savings for a replacement of that car. You may set aside $350 a month for maintenance and $400 for a car payment. Set up a separate savings account for those funds and don’t, I repeat, don’t use any money from those savings accounts except for car costs.

Using a car savings account doesn’t have to be so rigid that a $25 oil changes require you to login to your savings account and transfer $25 to your checking account so the funds will be available when the next credit card statement comes in. Just absorb it in the general checking account. However, a $500 brake job is paid out of the car fund. If you make is simple you are more likely to use the account and still to your budget. One of the best ways to save for the next car is to continue paying your car payments into the savings account once the car is paid off. The objective is to pay cash for the next car and not to have another car payment.

If you’re continuing to pay the car payments into the savings account, the decision can be made to buy a good used car or to continue saving beyond what is necessary for a used car and pay enough in car payments until you have enough for a new car. Keep in mind a 3 year old car can cost 50% less than a new one, so buying a new car is not a good investment, however, if you have saved for it and want the new car, do reward yourself for sticking to your budget and plan. While there may be additional repairs on a used car, the amount spent is always less the car payments and depreciation on the new vehicle.

Another reason for buying a used car is that insurance will be lower than on a new car as well as sales tax being less. (A side note, remember to buy your car in the winter when there are fewer buyers.

The main idea with using a budget is to understand where each dollar goes and to make conscious decisions as to how each dollar is spent. I recommend keeping only one or two low interest credit cards and pay off the balance each month. If you have several credit cards you should get rid of them, just be careful because canceling the cards may impact your credit. Yes, credit card companies ding you if cancel the card. If there is a balance on the credit cards set up an internal budget to pay off the balance in some time period, hopefully 6 months or less. Pay off the one with the lowest balance first so you can see that you are making progress in reducing your debt. Only put new items on the credit card that had been budgeted; no impulse purchases.

Use cash for groceries. I understand credit cards provide points or cash back, however, using cash for groceries and basic necessities is the way to keep within your budget. A dinner out comes out of that money as well. If there is left over money, it is used for something fun; reward yourself for keeping within your means. The physical act of paying cash makes a conscious connection that there are dollars being spent for a service.

Take Advantage of the Freebies!

Take advantage of free items available in your area. Get videos from your local library. A movie rental from Blockbuster will cost $4.50 and to buy a season of a TV series from Best Buy would cost about $30-$40. If you watch a season of a TV series in a month and watch a movie a week, that is 4 x $4.50 ($18) and $30 or $48 a month, or $576 dollars a year. That $576 can be used for something else such as savings for a car. Remember you only have so many dollars to spend and interest you pay takes away from what you can purchase in the future. As you get further and further into debt, more and more of your money goes to interest.

Many organizations provide free summer concerts and often libraries have a monthly music series.

By taking these steps your stress level will drop and you will feel good that you have taken control of your purchases. There are a lot of things you can’t control, but your spending is not one of them.

You’re 50, You’re Broke, Now What? First Tackle Your Finances

You're 50, You're Broke, Now What? First Tackle Your Finances