If you're retired, you need to be smart about how you spend your money. To do that, knowing how you spend your money is essential. 

For most retirees, spending follows a particular pattern. In fact, research shows that 80% of all spending in a typical elderly household goes toward securing five basic needs: healthcare, housing, food, clothing, and transportation. 

The good news is, there are small and large changes you can make to lower spending in all five of these areas. Here are some tips on how you can save. 

Mature couple reviewing financial paperwork

Image source: Getty Images.

Saving on healthcare

Healthcare is one of the biggest expenditures for many seniors, especially those experiencing health issues. Some key ways to save on healthcare include:

  • Align insurance coverage to your needs: While seniors are typically covered by Medicare, purchasing a Medigap plan or opting for a Medicare Advantage plan could help seniors further reduce healthcare costs. Shop for supplementary coverage carefully, considering premiums, services covered, and coverage limitations, taking your health into account. If you use a lot of care services, it makes sense to pay higher premiums to get more comprehensive coverage. 
  • Talking with your doctor about cutting costs: Doctors and patients rarely discuss cost-saving measures. In fact, an analysis from Duke University found costs of care came up in only 30% of conversations between doctors and patients. Around half the time costs are discussed, a strategy is developed to successfully reduce out-of-pocket expenditures. By raising the issue, you could find ways to save.
  • Exploring generic prescription options: Although seniors 65 and over account for just 12% of the population, they use 34% of all prescription medications and 30% of all over-the-counter drugs. Prescriptions make up a big part of spending thanks to Medicare coverage gaps for prescriptions known as the donut hole. Choosing generics instead of name-brand medication could provide significant savings, especially as generics must be substantially the same as brand-name pills. 
  • Taking steps to stay healthy: By remaining active, limiting alcohol consumption, keeping weight down, and maintaining other healthy habits, you can reduce the care you require and keep your healthcare costs low.

Saving on housing

While you need somewhere comfortable and safe to live, you don't have to spend a fortune on housing. Some tips to save include:

  • Downsize: Moving to a smaller and less expensive home could allow you to live in a paid-for house and reduce other expenditures such as utility bills and property taxes. If you're living in a home thats too large, moving is one of the best ways to increase financial security. 
  • Move to a lower cost-of-living area: There are major differences in cost of living throughout the U.S. If you're residing in an expensive area, moving could make a huge difference in how long your savings lasts and how far your Social Security benefits stretch. Check out some affordable places for seniors to see if relocating might be an option. 
  • Make sure you're not overpaying in property taxes: As many as 30% to 60% of homes in the U.S. are overassessed, according to the National Taxpayers Union. Consider appealing your estimate to lower your property taxes. You should also find out if your county offers any special property tax rebates for seniors. 
  • Consider a roommate or listing your home an Airbnb: If you have spare space, a roommate could help cover housing costs and even bring in extra income. If you're not comfortable living with someone else all the time, could you put your home on Airbnb during times when you'll be traveling anyway? 

Saving on food

Food is another necessity of life, but you can eat well without overspending. Tips to reduce your food budget include the following:

  • Avoid food waste: American families throw out about a quarter of all food they buy, wasting a fortune on uneaten food. Instead of tossing money into the trash, make a meal plan, shop from your list, and eat your leftovers. 
  • Shop based on coupons and sales: Food costs could be cut dramatically by shopping sales flyers and using coupons. Eating what's in season is another way to both stay healthy and reduce costs associated with food consumption.
  • Minimize meals you eat out: Dining out can be significantly more expensive than eating at home, and it's often less healthy as well. Limit the meals you eat out to save.

Saving on clothing

While you don't need office clothing any more, clothing remains a big expense. To save on your clothing budget:

  • Shop consignment shops or thrift stores: There's no need for brand-new clothing, especially when you don't need to dress to impress at work any longer. You can often score great bargains by shopping consignment stores for gently used items. 
  • Take advantage of end-of-season sales: By planning ahead, you can get most or all of your clothing on sale and spend far less than you would for full-price threads. 
  • Take care of your clothes so they'll last longer: Washing and drying is hard on clothing, so consider line drying (you'll also save on electricity). Consider mending instead of buying new, and treat stains immediately to avoid losing an outfit. 
  • Rent or borrow one-time outfits: If you have big events, like your children getting married, you want to look your best. But instead of spending a fortune on clothes you'll wear once, rent your fancy finery, don't buy it. 

Saving on transportation

Car payments and other transportation expenditures are a big portion of the budget for most seniors. Some key ways to save on transportation include:

  • Switch to being a one-car (or no car) household: When factoring in fuel, maintenance, insurance, depreciation, registration and other expenditures, the average annual cost of owning a car is almost $9,000, according to AAA. Since you're no longer commuting, see if you can get by with one car. If you live in a walkable area, having no car and using ride-shares or rentals could also be an affordable alternative. 
  • Pay cash for older used cars instead of new cars: The average auto loan now tops $30,000, and consumers are taking longer loans than ever. If you're like most Americans, you constantly have a car payment. Instead of borrowing for a new car, keep your current vehicle as long as you can. When you're done paying off your loan, save the money you'd spend on payments to buy a lower-cost used car. Keep saving for used cars and never get stuck with a car loan again.
  • Let your insurer know you're retired: Now that you're retired, you're probably driving less. By letting your insurer know your patterns have changed, you may reduce auto insurance costs. 

Cutting costs allows you to make the most of retirement money

While you may not want to make all of these changes at once, taking as many steps as you can to reduce fixed costs will give you a lot more money for fun expenditures, such as travel or indulging hobbies -- or it will allow your limited savings to last longer. 

By making changes in your biggest expenditures, you can reduce the chances of running out of money and direct more of your money to enjoying life. 

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