Budgeting when you’re on Social Security ensures you can live comfortably knowing that all your financial commitments are covered. If you’re one of the 67 million Americans that currently receive Social Security benefits, then the recent cost of living adjustment (COLA) of 8.7% will have been welcomed with open arms. But it’s important not to expect COLA adjustments or let them affect your budget, as they’re not guaranteed and next year’s COLA is likely to be less than 3%. So, how do you budget for everyday life when the cost of almost everything is rising?
Consider All Your Income
On average, people on Social Security receive $1,781.63 every month. For some people, this will be their only income, but others will also have money from a part-time job, pension, interest, or dividends to consider. Take note of all your income so you can budget accordingly. Start by focusing on essential expenses first, including rent or mortgage payments, utilities, insurance, and groceries. Then, you’ll know what you’ve got left for non-essential items and luxuries. Be prepared to adjust your budget throughout the year to take into account additional expenses. People tend to spend more in winter due to heating costs, thanksgiving, and Christmas. Meanwhile, irregular interest payments will temporarily increase your budget, but should only be taken into consideration when they’re due.
Boost Your Budget
In the US, the average cost of living for a single-person household is $3,189. It’s fair to say that, for many, the average Social Security check isn’t enough to survive on. Therefore, finding ways to boost your income is recommended to help increase your budget. This could involve taking on a part-time job or doing seasonal work throughout the year. Renting out a room or your driveway can help too. It’s also worth doing things like this when you’re waiting to be approved for Social Security. Disability Secrets reports that on average people wait 27 months for approval. This is because 80% of Social Security applications are initially rejected and claimants have to go to court. Social Security administrative hearings will then take place in front of a judge. Their job is to review all the evidence and cross-examine you before providing a written decision.
Track Your Expenses
Do you know how much you spend on groceries, power, and fuel each month? Most people will have a figure in their head, but the actual amount is likely to be more than this due to ever-growing price rises. For example, in 2022 food prices increased by 9.9% and this year they’ll go up by a further 6.6%. The first thing you should do is categorise your expenses into topics, such as housing, food, healthcare, and so on. You can then go deeper and subcategorise by listing how much you spend on things in each category. So, for healthcare, this may include health insurance, prescriptions, over-the-counter meds, and similar. By doing this, you’ll get a clear picture of all your expenses and it will help you to identify which expenses you could cut.
Social Security is an essential income for many. But it’s often not enough to live solely on which is why careful tracking, budgeting, and additional income streams are needed.