For senior retirees, careful budgeting is of paramount importance because most are on a fixed income.

Unfortunately, millions of seniors can't quite make the numbers work. In fact, a report last May from the Employee Benefit Research Institute revealed 41% of older households spent more than their income over the course of the year. The same research also revealed median spending for single and retired individuals actually exceeded median income by $3,000. 

This troubling data means that more than four in 10 retirees are in serious danger of financial disaster. 

Older couple with calculator looking at financial paperwork.

Image source: Getty Images.

Too much spending is an especially big problem for retirees

Spending that exceeds income can be a big problem no matter how old you are, but it's an especially serious issue for seniors because most retirees have a finite amount of money coming in. There's usually no way to increase it unless they draw down investment accounts too quickly and risk running out of money or find a job, which is impossible for many older people -- especially those facing health issues or who have been out of the workforce for a long time.

If you can't or won't take more out of savings and you spend more than you have, you'll probably end up in debt. You'll have to use a portion of your future funds to pay back your creditors with interest. That reduces the cash available for current expenditures, thus making it harder in the future to live on what you have coming in. 

If you face shortfalls again because you're spending too much on debt payments, this will only lead to borrowing more and making your financial situation even worse. 

How you can cut costs as a senior

If you've outspent your income, or you're at risk of doing so, you need to act quickly to cut costs. 

For many seniors, overspending happens because of healthcare. Making sure you sign up for the right Medicare plan during open enrollment can sometimes help you keep costs down. If you need a lot of care, it can actually make sense to pay higher premiums up front for a more comprehensive Medigap or Medicare Advantage policy that reduces expenditures during the year. 

Overspending may also occur because you're trying to remain in an area with a high cost of living or in a home you can't really afford anymore without a steady paycheck. Relocating to a cheaper place or even simply downsizing to a smaller house could make a huge difference.

You should also take a close look at your budget to see if you're devoting too much to discretionary expenses such as entertainment or travel. And if you have a costly vehicle, selling it and getting a cheaper car (or eliminating a vehicle altogether) could make a big impact. 

If you still find you're falling short, you may want to look into whether you can qualify for any government help such as Medicaid to defray healthcare expenditures or Supplemental Security Income to provide extra cash if you have very little money coming in. 

You can avoid becoming one of the older households facing a financial shortfall

The best way to avoid a financial shortfall as a retiree is to save up a significant retirement nest egg. if you have lots of money in savings, your investments should combine with your Social Security benefits to produce enough to live comfortably.

Unfortunately, if you're already retired and find yourself overspending, it may be impossible to increase your savings to avoid financial disaster. In these circumstances, it's best to make big lifestyle changes quickly to cut costs. The longer you wait to downsize, the more quickly your funds will dwindle, and the more financial trouble you'll face when you can least afford it.