Working for a busy bankruptcy law firm, I see a wide variety of clients filing for bankruptcy relief. I work with both consumers and businesses but the hardest cases I work with are senior citizens filing for bankruptcy relief. My senior clients, especially the men, tell me repeatedly that they never dreamed they would have to file bankruptcy. Many of them apologize to me as if I have some way of absolving them from the guilt they feel over filing bankruptcy.
The harsh reality for many senior citizens is they have a fixed income and no way to increase that income. Rising health care costs and higher living expenses creates a negative budget with their fixed income not adequate to cover their basic needs. Some ideas that I have seen my clients use to increase income and decrease expenses include budgeting, liquidating assets and bartering services.
Ways to survive on a fixed income
Reverse mortgage – This is becoming more popular with seniors who have worked hard all their lives to pay for their homes and have substantial equity to tap. A reverse mortgage pays you a preset monthly amount or allows you to draw funds from the account, as you need them. The mortgage is due and payable upon your death or the sale of your home. Before entering a reverse mortgage, you should discuss it with your children and a qualified financial advisor.
Borrowing against life insurance – Universal and whole life insurance policies accumulate cash value as you pay the premiums and hold the policy. Policies that have been in effect for many years may have a substantial amount of accumulated cash value. Before borrowing against the cash value, make sure you inquire about fees associated with a withdrawal and make sure that enough proceeds will remain for your burial and to provide for your spouse if he or she is still living.
Bartering – One client told me that she babysits her neighbors children each afternoon after school in exchange for various things – – meals, car repairs, home maintenance, errands, etc. Her neighbors will cook meals for her or take her to run errands in exchange for the babysitting. Some of the men mow her lawn and do small repairs to her home and car. Seniors have many skills they can offer in exchange for things they would otherwise need to pay someone to do for them.
Liquidating assets – The other thing many seniors do to increase income is sell items they no longer need or want. Items that have been well cared for often will bring top dollar at auctions or local flea markets. eBay and Craigslist are other ways to sell items; however, never let anyone come to your home to view and item – – ask a neighbor or family member to be there with you or take the item to a public place to allow the buyer to buy it.
Budgeting – Even seniors need to budget and be more careful with their spending. Budgeting benefits everyone, no matter what their age, and helps decrease unnecessary expenses. Having a written budget also will help determine places where money can be saved by negotiating with companies for senior discounts or other discounts to lower the expense.
In addition to these suggestions, seniors should take advantage of coupons, discounts and other ways to save at local retailers. Use coupons in combination with senior discount days to save any more money on oil changes, meals, groceries, services and other necessary expenses.
More from this contributor:
Why Women Need to Plan for Retirement as Early as Possible
Five Fundamentals of Saving for Retirement
Eating for Less Does Not Mean Eating Less