We need your input! I am trying to help a friend of mine with her financial situation and as we are running out of ideas I would really like to hear your suggestions too..!
A friend of mine has limited finances and we are of course trying to make the most out of them but sometimes a helping hand is needed. I will start by giving you the background, what we have been talking about or discussing and then I would love to hear your ideas of what she can do to improve her financial situation!
She retired a few years ago in Sweden and has a low pension of roughly 1,500 USD after tax and in a few years it will decrease with another 150 USD. She is very active and cost conscious (we have discussed this several times) but her health is extremely important so good quality food is a priority (noodles all the way won’t do) as she wants to continue living a long and healthy life for decades to come.
Rough costs per month:
- Accommodation (rental, including heating and water): 700 USD
- Food and household goods: 350 USD (eating out maybe twice per month)
- Car: 300 USD (cash purchase so this is only petrol, insurance, tax and some maintenance)
- Travel: 150 USD (average monthly)
- Miscellaneous: 120 USD (dentist, doctor, supplements, gifts etc.)
- Home insurance: 15 USD
- Clothing: 30 USD
- Electricity: 40 USD
- Internet: 25 USD
- Mobile: 10 USD
- Memberships: 10 USD
The above total is: 1,750 USD so she is eating from a limited savings account every month (on average).
I have always (and always will) been preaching that there are only two ways to go once you have taken control over your finances and that is to either lower your expenses and/or increase your income. The challenge I find here is that we have already been working quite a bit with her costs already and according to Swedish statistics, she is just above the “poverty line” meaning her income is amongst the lowest 10% of retirees. Still she is very happy and living a great life and wants to continue doing that for more decades!
What we have discussed in terms of her costs…
Every year we go through her fixed costs to see what we can do. So mobile, internet, insurance, electricity is checked and compared at least once per year and I don’t think there is much more we can do there (until prices drop even more).
The main challenge is her accommodation which is very high as a proportion of her pension and will increase every year. The only way to get this down is by her moving but the rental market is very tight where she lives and moving to another location is not really an option. Trying to find something else and maybe smaller (approx 700sqf or 66m2) might be a solution but that might take years (very long rental queues here). Sharing with a friend is not really on top of the agenda either as, well… it’s just not the way it is done and in particular not when she still has some savings that will help her out for a while longer.
Food is a big one and it’s more expensive to live in a smaller city (less variety and higher cost) and in particular if you want to prioritize quality food and organic produce. She shops at sales, at local markets, has her own garden so a lot of vegetables luckily are home-grown (maybe more can be done…). In this post we also include quality care products which again cost more (chemical-free washing powder, tooth paste, body lotion, shampoo etc.). My guess is that this one could otherwise be halved but her health is the most important thing she has, however surely there are things to be done here. One of my suggestions is that she buys some stuff in bulk at a low-cost store and we could do that for here when we do our shopping.
She does “need” a car and as the one she currently owns has already been paid for, the cost of running it is quite low. I have thought about asking her to sell it and get another one to get the costs down but then you might run into higher maintenance costs. I think she could sell the car for 7-8 kusd, buy one for 3 kusd and by doing so halve her insurance, tax and petrol consumption. That would mean around 50 usd less per month, given that this car would have the same amount or less costs for repairs etc… but the car will remain with her for some time as in her city, there are hardly any car rentals and having the car is important to her (I try to help as much as I can with servicing her car).
Travel is something we all love to do and as a retiree she can be very flexible and trying to keep her costs down but still, there are costs associated with traveling, both domestically and internationally. As she is retired, it is likely that this post will come down more and more over the years but fingers crossed it is more than a decade away! We have discussed this a lot so she is very price sensitive and cautious and always using comparison sites for bookings, staying with friends or AirBnb, flying low-cost airlines and trying to split as many costs as she can with her travel companions.
Miscellaneous stuff or activities are in general things that are needed and she is making price sensitive choices as well as quality choices. This post is quite large but that is also because sometimes there are larger expenses and sometimes smaller ones and instead of stating every post that occurs maybe once per year, this category ended up covering for a bit of everything… As she is retired, I believe she gets a discount for most of these things like doctors appointments (cheap anyway in Sweden), opticians and dentists etc.
The remaining ones are small and we have not managed to do anything else with them but we check them every year. We canceled her cable and WiFi this year so she is just using mobile data for everything (halved her monthly cost!).
The additional minor things we have discussed are: Bulk buying via someone else for produce that lasts a long time and be a bit smarter with food purchases. Cancel one of her banking relationships and move to another one offering the service for free (only 30 usd saving per year but every little counts…). This is about it as we are a bit stuck for ways of reducing her costs further unless she finds someone to share the biggest expenses with, then she would live like a queen:).
What we have discussed in terms of increasing her income…
She has done the odd jobs like dog walking and house sitting though the need for it is quite limited in her area. We are looking into the possibility of her doing some babysitting or similar as well but we need to work more on that one.
The other thing we have thought about is for her to sublet her flat and stay with friends on those occasions (although low demand for it in her town and not sure whether her contract allows it). Maybe she could join Uber, not sure they would approve her car or whether there is any demand in the area as it is a small town. She has signed up with a company offering temporary staff but no luck there. She could potentially sell a picnic-bag to other members of her retirement group when they go for their weekly forest walks (not discussed yet).
Where we currently stand, I don’t see that much more we can do but I also know that the more different ideas I can share with her from you guys, the more open she will be about them!
A massive thank you in advance!
Actions to take:
Please comment below with your ideas and tips of what we can do to improve her financial situation:)!