When I share the joys of fixed income retirement, most of what I talk about are the good things. Overall I have an extremely rich (if unwelcome) early retirement. I enjoy holidays, festivals, have friends and church. I travel, and enjoy my home and dogs. Life is not perfect however and I am not Pollyanna. It's only fair to share some of the wrinkles as well. In this case, not only am I willing to share, I want your opinion. All I ask is that you be kind.
Recently I've been hitting a few bumps in my fixed income retirement road. Manageable in the long term, these bumps have created a temporary short fall in my frugal yet rich retirement. This is because although my monthly income is between $2200 and $2450, I have no savings. This lack of savings or emergency fund is where my previous financial missteps come to hit me the hardest.
Had I managed to put even a tiny part of my life insurance aside in liquid cash, life would be a different situation. While most of the time I can have a philosophical attitude towards my depression spending, this one area truly affects both my quality of life (and security). This is the area where I hope others learn from my emotionally made mistakes. Had I even a few thousand dollars in liquid savings, life would be much more advantageous. That wiggle room would allow me much more freedom. I could invest, have an emergency fund-you get my drift.
My monthly pension covers ALL of my basic month to month bills and needs from my mortgage to groceries to personal care. What it's not covering are the month to month issues that "pop up" and that can be more than minor. I've assigned all the money I make from my income streams to those other expenses and that's a small but growing amount. When I need to fix the air conditioner, get a last minute offer to do a craft show, or want to take an unplanned day trip however, all those things are impacted by my lack of savings. when I'm doing my tax return and it suggests investing in an IRA (I have no idea if this even makes sense at age sixty), I have to say no.
While one obvious solution might be lifestyle shrinkage, at the moment that's neither easy nor desirable. I live in an unusual area-home prices have not dropped, but houses are not selling. If I moved to a condo with two or three bedrooms or even an apartment, my monthly bite would not drop that much. Either way, that solution will be a year or so in the making, if I choose that option. Aside from the logistics of selling, I'm a woman with part time adult kids at home, two very large dogs................that movement process is not instantaneous. And I love my house. I don't mind being house poor-within reason.
Meanwhile I have three needs-some additional income (growing every day), a so called emergency or house fund, and some savings. To that end, I've been looking at some solutions.I don't want to take out a home equity line of credit. This is not my forever retirement home, I don't want a monthly payment added to my budget, and I don't want my monthly mortgage payment to increase. I'm in the unique situation of having a zero on my tax return. It may never happen again, I'm not sure how I got to that point this year (I do not have taxes taken out of my income, and I do pay my medical premiums outright) but the old "tax return as savings" is not an option, even at my low income. I can be putting some of my income from quilting and working online aside. I do this now, but that amount is not increasing in the way I would wish. I really need a one time quick cash infusion. I can cut some more expenses without pain (getting rid of my security system, eliminating cable, downsizing my cell phone back to a non smart phone model-all possibilities). I still need that cash infusion.
One solution that has come up on my radar is to sell my good condition paid for car and purchase an older model and bank the rest. My car would get between thirteen and fifteen thousand on the open market, and I would then purchase an early two thousand model-say a Honda CRV or a Subaru Forrester.
This is an extreme solution that would have it's plusses and minuses. I would have an immediate infusion of cash, which would be divided between savings, and so called emergency fund. Some of it might even be used to start an IRA (is it wise to start an IRA at sixty?? Does it even make sense?). Those are all ups. On the other hand, I would have an older car with more repair needs (the only thing ever done to my RAV4 were the oil changes and factory recommended checks). I do some regular cross country driving. How will that be impacted by an older car. I know some of you have 2000-2005 era cars and do this kind of driving. Does it impact you in any way? I have no mechanical ability. Would it make sense to have a monthly car repair category that if unused could go towards buying a new car with cash?
Finally, is there a short term solution I'm missing that does not include increasing debt? Obviously I've not included "selling my stuff" as an alternative solution. I continually downsize, but parting with the good stuff is not a solution I want at this point. My income is continually increasing while my expenses are shrinking, so my long term outlook is good. It's the short term that has become an issue.
What do you think? Would you make such a drastic decision? Would you take on short term debt? Ignore the situation and plow on trying to add small savings here and there? Is there a reasonable solution to this problem? Throw it at me. Quickly.