The key to living frugally in retirement at a comfortable level is knowing the difference between frugal and cheap. Paying less for inferior quality is cheap. Paying less for similar or superior quality is frugal. Beyond that, it’s all a matter of being methodical in your search for frugal comfort. (For more, see How to Tell If You're Cheap or Frugal.)

Living Frugally in Retirement on a Budget

Frugal budgeting aims to achieve a cost-effective lifestyle in retirement that does not sacrifice comfort. This involves knowing not only where to cut costs but also how. Frugal budgeting is not haphazard. It is thoughtful and documented. For most people this involves creating a repeatable monthly budget that projects out a full year to allow for quarterly, semiannual and annual expenses such as income taxes, real estate taxes and insurance premiums

Target Proportionally

A frugal budget considers the proportion of spending for each category as a way to find value and savings as efficiently as possible. The Employee Benefit Research Institute recently broke down how people 65 to 74 spend their money, beginning with home-related expenses, which take up 43% of a retiree’s budget. Next comes transportation, at 14%, followed closely by food, at 13%. Health-related expenses are 11% of the budget, with entertainment (9%), clothing (3%) and other expenses consuming about 7%.

Choose a Lifestyle

The most obvious thing to target first is where and how you will live – your home. Do you want to downsize from your two-story house to an apartment or condo? Relocate to a warmer climate or a small town? Do you want to try living a nomadic life in an RV or on a sailboat? Or are you like many people who want to stay put – at least for now? It’s important to think about the lifestyle you want in retirement and apply frugal strategies to it. (For more, see Retirement Lifestyle Planning: How to Be a Nomad)

Downsize for Savings

For many, including those who decide to stay put for now, downsizing is part of the equation. Smaller homes are less expensive to buy and to maintain. Downsizing also provides an opportunity to sell (or donate) household items that are no longer needed. You may be able to save money by using family and friends and renting a truck instead of hiring a moving company, as you will have fewer belongings than you did before retiring. Retirement Downsizing Tips (Not Your Home) has some other good ideas.

Trim Transportation Costs

If you have two cars, sell one. Retirement may also be a good time to buy a newer, more fuel-efficient vehicle. And look at ways to reduce your auto insurance payments to see if you can cut costs there. If you’re planning to buy a motor home, a smaller Class C might make sense. Class A motor homes are expensive to own and maintain and costly to drive. If you plan to live on a boat, you may not need a vehicle at all (see How to Get a Mortgage on a Houseboat). 

A Frugal Approach to Food

The best way to be frugal with food is to eat at home. Create a menu, build a shopping list and stick to it. Impulse buying should only enter the picture when you come across an unexpected bargain. Grocery shop at super centers, dollar stores, wholesale clubs and farmers’ markets. Many stores have senior discount days with 10% or more taken off your entire bill.

Save on tipping when dining out by looking for cafeteria-style restaurants with limited or no wait staff. Some of the nicer ones have excellent food offerings, table-side drink refills and even staff to clear your table after you finish eating. Early bird specials, especially in resort areas, offer additional savings when dining out. 

Help Yourself to Better Health

It only makes sense to stay as healthy as possible. That means staying up to date on vaccinations and flu shots. Get and stay fit by walking on a regular basis. Walking is free and an excellent way to stay fit.

Medicare Advantage (Part C) plans are often less expensive than traditional Medicare. The downside is a limited range of physician choices. Schedule elective medical procedures after you’ve met your annual deductible and avoid out-of-network doctors when possible. Take advantage of free preventative services, including breast and colon cancer screenings. See your family doctor periodically for a checkup. 

Entertainment Options

Unless it's necessary for reception, eliminate cable TV – or at least reduce it down to the most basic package. Add Netflix or Hulu for movie and other streaming options. Museums, art galleries and many live performances are free or discounted to seniors. Check for discounts through AARP or AAA if you belong to either of those organizations. Many cities allow seniors to audit college classes for free (without credit).

Clothing and All the Rest

Ask about senior discounts everywhere you shop – even if there is no sign. You might be surprised at how many places offer, but don’t advertise, them. It never hurts to ask.

And as you have more time than when you were working, use it to your advantage. Go to thrift stores. Attend garage and yard sales and swap meets. Grow your own food – or at least some of it.

The Bottom Line

Don’t get up early. Waiting until daylight saves electricity. Give yourself plenty of time to get where you need to go and save on gasoline. One of the biggest enemies of frugality is rushing. Rushing doesn’t just waste energy; it also wastes resources. Finally, don’t try to be frugal about everything all at once. Being frugal isn’t meant to be punishment. Enjoy your frugal lifestyle and stay comfortable – for less.

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