Expect the Unexpected
Mon Sept. 2nd 2019
You might think you have your life and finances sorted when you retire. You've planned your budget and you know that every regular expense is covered. What you may not have planned for is unexpected expense, which could be dire for your future comfort, and is something to avoid if possible.
How to handle surprise bills after retirement
You might think you have your life and finances sorted when you retire. You've planned your budget and you know that every regular expense is covered. You may even have enough for occasional treats like dining out or a movie.
What you may not have planned for is unexpected expenses – because, of course, you aren't expecting them. If you aren't prepared to meet those surprise costs, then any savings you have could be eroded to pay the bills. That could be dire for your future comfort, and is something to avoid if possible.
What unexpected costs can you expect?
Your children (if you have some) are unlikely to set up on their own before they reach late 20s or early 30s. On average, they're staying in school longer, getting married starting a family much later than your generation did. They might try flatting when they're at uni, but they're quite likely to move back in with you when they graduate. You could be supporting them and even their family until they're well into their 30s, while they save for the deposit to buy their own place.
Relationships don't last as long these days either. A child you thought was safely moved out could come running back after a messy divorce or break-up. Even if your kids pay board, it still costs extra to feed and house one or more extra adults.
We're living longer than ever, and often the baby-boomer generation is caught in the middle, between kids who won't leave and parents who need care. Just as you wouldn't leave your children high and dry, neither would you let your parents struggle on alone when they need your help – but it's another expense.
Dave Louton, professor of finance at Bryant University in Smithfield, Rhode Island calls boomers "the sandwich generation" and sometimes that's just what it feels like! If your parents are not just getting frail, but also struggling to meet expenses, then it pays to find out what support is available from government care programmes and NGOs like Age Concern.
Looking after your house and car
Nothing lasts long if you don't look after it. Be sure to include in your budget an amount for the ongoing maintenance of your home – not just lawn-mowing and clearing the gutters, but bigger bills like plumbing, roofing and electrics. You won't want to live with a dodgy, sparking power point, or a leak that can do extensive damage if it isn't seen to promptly.
Then there's the car. Don't think of your car as an asset – even when it's not breaking down, it costs you money. You can include appliances in this list, and expect to replace them when they give up the ghost. Hardly anyone does appliance repairs these days.
Looking after your health
New Zealand has a great public health system, which you can augment with insurance, but you still may develop one of those conditions that insurance doesn't cover, and that the public system doesn't see as an emergency. For example, hearing loss and dental care are two areas that can get very expensive as you age.
Losing your partner
Accident or illness can deprive you of your partner – and it's more likely to happen the older you get. But what can cause more money problems than death is divorce, which is getting to be more common for older people. A study from tje Pew Research Center (2017) showed the divorce rate for people over 50 rose 109% from 1990 to 2015.
Divorce can be messy at any age. When you're retired and want to separate, it's particularly expensive. What you saved together is now halved, and at least one of you has to find somewhere else to live, which could mean more rent or another mortgage.
How to prepare for the unexpected
Stay on top of your household finances
It's a mistake to leave the financial management of your savings to just one of you. You both should keep an eye on the budget, and manage money on your own so that if the worst happens and your partner dies, you won't be left floundering. It's bad enough to have less to live on, and all the expenses of a funeral and burial to pay. It's much worse when you have no idea of your financial position.
Similarly, a divorce might be unexpected, but if you've kept yourself informed of your position, the trauma can feel less intense.
Keep a credit card handy
When you're presented with one of those nasty surprises what you need is fast access to money. You don't need to be a pessimist, always expecting the worst. Just be ready for anything that life throws at you. That means keeping a credit card or overdraft ready to use when you need emergency funds, so you don't have to break your investments. Treat this credit card as an emergency fund only and if you need to use it, plan to tighten your belt and pay the debt off as quickly as possible.
Maintenance, maintenance, maintenance
A stitch in time, really does save nine. For example, clean gutters prevent all sorts of far more expensive repair jobs.
The same goes for your car. Regular tune-ups and servicing will keep your car running longer and more efficiently. That means less spent on petrol, and worn parts identified and repairs made before they do real damage.
Then there's your health. With regular attention, issues with your teeth, eyes, hearing and everything else can be dealt with when they're smaller – and less expensive. You, yourself should take care of your health – eat well, take regular gentle exercise, and stay involved in your community. It's the best recipe for a long and happy retirement – and far fewer of those expensive medical bills.
Quality matters and so does size
If you're still living in the family home, it might be time to consider downsizing – you won't want to be heating and cleaning all those rooms. If your home is in good repair, you can probably trade it in for a smaller, newer dwelling, and have something left over to tuck away into your savings.
Alternatively, that extra cash from downsizing might be used to replace the worn-out car, appliances and whiteware with quality products that will last as long as you do. It's a win all round – a new home, car and quality appliances are more efficient and less expensive to run and maintain.
Unexpected expense? What to do right now
Ask family for help
Don't let that nasty surprise get you down. Swallow your pride and ask your still-employed children for help. Even if they don't have the ready cash, being employed means it's easier, and cheaper, for them to borrow what you need to repair your roof or get new tyres for your car. Remind them that you might need to cash up your investments otherwise, which means less of an inheritance for them!
Access governmental help
Your children may be unable to help you, and if your retirement income is limited, you could be eligible for government help. Also, investigate what advantages your SuperGold Card brings – some free transport, discounts on petrol, health and housing expenses, or emergencies that are beyond your means, like dental treatment or hearing aids.
Consult your bank
Take your ID along to your bank and ask for a short-term loan to clear those emergency costs. That way, if you can get a good interest rate, you won't be breaking into term deposits or spending your capital. Rein in your living expenses for a while to clear that loan, and you're back on track.
Be ready, and enjoy life!
Even though none of us can predict the future, you can still be as ready as possible to face whatever comes. Sidestep those surprise bills by maintaining your house and car, and live your retirement with mindfulness and care. Deal with the unexpected by establishing an emergency fund, having credit on hand, and keeping on top of your regular finances. Above all, look after your health – eat well and have regular checks to catch any problems early.
At the same time, enjoy your retirement – you earned it!
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