Reverse Mortgage Is Right for You ?
Reverse Mortgage Is Right for You
Human needs can be broken into categories, with some areas carrying more weight than others — like a what-you-need pyramid. At the base of the pyramid, you may place things like food and shelter, and toward the top, less tangible items such as self-esteem and independence. Reverse mortgages can address all of the essential human needs when the mortgage is taken out responsibly and in your best interests. It can help pay for your basic needs, while affording a sense of peace and financial independence that only comes with the security of money in the bank.
As great as that sounds, reverse mortgages aren’t a magic solution for every household. Before you start buying up toys and timeshares, create a detailed budget of what you need per month. The things you need depends on how loosely you use the term, but you can consider the things you need as the non-extravagant items that get you from day to day. Food, medicines, health care, a safe place to live, electricity, water, gas, car payment, insurance, taxes — these are all needs that you’ve probably become accustomed to. Include everything from toothpaste to home repairs to your pet’s medications . . . anything you wouldn’t be willing to forego.
Preparing a needs budget
To account for your needs, simply look to your wallet. Each of your essential needs has a price, and knowing what you spend your money on is an easy way to focus in on your true needs versus your want-to-haves. Start paying attention to every item or service you pay for, and write it all down in a specially designated notebook or pad that you can carry with you. After a few weeks, take a hard look at your list and circle the expenses that you simply aren’t willing to give up. These are the things you personally need. Now consider what your needs alone are costing you per month. It can be a shock to see how quickly it adds up! Check out Table 2-1 for a sample needs budget. Notice that the list of needs isn’t strictly food and shelter, but also costs that have become associated with this imaginary senior’s standard of living.
Table 2-1 Sample Needs Budget
Need Cost per month
Phone bill $39.99
Electric bill $22.00
Cable bill $45.00
Water bill $10.00
Car insurance $115.00
Gasoline $40.00
Groceries $150.00
Prescriptions $67.89
Pet food $12.50
Pet medication $35.00
Hair cut and/or set $45.00
Life insurance $60.00
Daily paper $15.00
Postage stamps $7.35
Weekly lunch with sister $60.00
Internet connection $9.95
Club membership $35.00
Housekeeper $50.00
Total $819.68
You can see how quickly these things add up. Now take an honest assessment of your own list. Determine if you can pay for all of these needs now. If not, figure out how much more money you need to meet your expenses. Don’t forget to consider cutting back on your expenses to meet your budget.
However, even when you live on a tight budget, your expenses may be more than you can handle. Many people find that their pennies are pinched so tightly they’ve got “one cent” permanently imbedded in their thumbs, and yet their monthly expenses still come up higher than their monthly income affords. A reverse mortgage can change all that, giving you the extra padding you need to keep your life running normally, without giving up your necessities. If the things you need have become the things you’re struggling to get, a reverse mortgage may be able to give you the economic boost you need to make ends meet.
Paring down your needs
When you look at what you spend each month, or even each week, you may be shocked by how much money goes flying out of your wallet. You spend $5 here and $2 there, which all seems perfectly harmless until you realize that you’ve spent $150 in one month on ceramic toothbrush holders and yet another pair of slippers.
We would never tell someone not to buy the things they really need. By all means, if your feet are cold, buy more slippers. But first, take a peek under the bed and see if you can save yourself a few bucks by using what you already have. We know a woman who moved out of her home after 10 years and found 38 pairs of nearly identical sunglasses throughout her house — she just kept buying new ones each time they were lost. At $10 a pair, that’s $380 down the drain.
You may be surprised at how much you can save by simply eliminating one small thing. While this is by no means a complete list, here are some simple suggestions to get you thinking about how you can reduce some of your expenses:
Try going to the movies less frequently. If you can’t forego having a weekly movie night or several nights a week dedicated to movies, try renting or hit the matinees (and don’t forget to ask for the senior discount!).
As great as that sounds, reverse mortgages aren’t a magic solution for every household. Before you start buying up toys and timeshares, create a detailed budget of what you need per month. The things you need depends on how loosely you use the term, but you can consider the things you need as the non-extravagant items that get you from day to day. Food, medicines, health care, a safe place to live, electricity, water, gas, car payment, insurance, taxes — these are all needs that you’ve probably become accustomed to. Include everything from toothpaste to home repairs to your pet’s medications . . . anything you wouldn’t be willing to forego.
Preparing a needs budget
To account for your needs, simply look to your wallet. Each of your essential needs has a price, and knowing what you spend your money on is an easy way to focus in on your true needs versus your want-to-haves. Start paying attention to every item or service you pay for, and write it all down in a specially designated notebook or pad that you can carry with you. After a few weeks, take a hard look at your list and circle the expenses that you simply aren’t willing to give up. These are the things you personally need. Now consider what your needs alone are costing you per month. It can be a shock to see how quickly it adds up! Check out Table 2-1 for a sample needs budget. Notice that the list of needs isn’t strictly food and shelter, but also costs that have become associated with this imaginary senior’s standard of living.
Table 2-1 Sample Needs Budget
Need Cost per month
Phone bill $39.99
Electric bill $22.00
Cable bill $45.00
Water bill $10.00
Car insurance $115.00
Gasoline $40.00
Groceries $150.00
Prescriptions $67.89
Pet food $12.50
Pet medication $35.00
Hair cut and/or set $45.00
Life insurance $60.00
Daily paper $15.00
Postage stamps $7.35
Weekly lunch with sister $60.00
Internet connection $9.95
Club membership $35.00
Housekeeper $50.00
Total $819.68
You can see how quickly these things add up. Now take an honest assessment of your own list. Determine if you can pay for all of these needs now. If not, figure out how much more money you need to meet your expenses. Don’t forget to consider cutting back on your expenses to meet your budget.
However, even when you live on a tight budget, your expenses may be more than you can handle. Many people find that their pennies are pinched so tightly they’ve got “one cent” permanently imbedded in their thumbs, and yet their monthly expenses still come up higher than their monthly income affords. A reverse mortgage can change all that, giving you the extra padding you need to keep your life running normally, without giving up your necessities. If the things you need have become the things you’re struggling to get, a reverse mortgage may be able to give you the economic boost you need to make ends meet.
Paring down your needs
When you look at what you spend each month, or even each week, you may be shocked by how much money goes flying out of your wallet. You spend $5 here and $2 there, which all seems perfectly harmless until you realize that you’ve spent $150 in one month on ceramic toothbrush holders and yet another pair of slippers.
We would never tell someone not to buy the things they really need. By all means, if your feet are cold, buy more slippers. But first, take a peek under the bed and see if you can save yourself a few bucks by using what you already have. We know a woman who moved out of her home after 10 years and found 38 pairs of nearly identical sunglasses throughout her house — she just kept buying new ones each time they were lost. At $10 a pair, that’s $380 down the drain.
You may be surprised at how much you can save by simply eliminating one small thing. While this is by no means a complete list, here are some simple suggestions to get you thinking about how you can reduce some of your expenses:
Try going to the movies less frequently. If you can’t forego having a weekly movie night or several nights a week dedicated to movies, try renting or hit the matinees (and don’t forget to ask for the senior discount!).
- Consider getting your hair done every 12 weeks, rather than every 6 weeks.
- Assess whether you really need to go shopping for junk at the bargain store every weekend.
- Experiment with different, less expensive brands at the grocery store.
- Sniff out the bargains. Check out whether you can find a similar item somewhere else for a better price.
Keep track of your things. If you find yourself repurchasing things because you lost the original . . . for the sixth time, perhaps you can devise a way to make sure the items you lose most often have a special place of residence.
Pare down to basic cable (who really watches all those channels anyway?) and you could save about $400 per year.
Make coffee at home every morning instead of going out to a café and you could save around $900 per year!
Hopefully, this list gets you thinking about your spending habits — perhaps you don’t need more money, just less spending! Many seniors need to make every dollar count, especially since newly retired people may not be used to living on such a fixed income. It takes some planning and careful spending to make any income, including a reverse mortgage, work for your budget.
If you can afford your current lifestyle by budgeting a little tighter, you may not need a reverse mortgage for your daily living. Mortgages cost thousands of dollars in fees, interest, and little incidentals. You may be able to skip all that hassle and expense by simply watching your wallet a bit closer. If you think you’ll need access to more money in the future (your income is running out or you’re expecting big medical bills) you may be able to wait a few years and still save yourself some money. On the other hand, if you need a little extra so that your necessities don’t have your wallet running on empty, a reverse mortgage may be just the thing.
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