Many seniors who receive limited pension income once per month find it very difficult to budget. These circumstances actually make it more important to budget to ensure sufficient funds for food and other necessities of life for the entire month.

Steps to Create a Budget

The first step in creating a budget is to make a list of all income received. Most seniors are eligible to collect Old Age Security (OAS) benefits to a maximum monthly amount of $613.53 in 2020. The benefit is paid the second last banking day of the month, starting the month after a 65th birthday. Many seniors are also eligible to receive Canada Pension Plan (CPP) benefits to a maximum monthly amount of $1,175.83.  The monthly benefit is based on how much and for how long you contributed to CPP, with the average monthly amount seniors received in 2020 being $710.41. CPP is usually received on the third last business day of the month. Seniors may also be eligible for the Guaranteed Income Supplement depending on the total amount of income claimed on the prior year’s tax return. The monthly supplement benefit maxes out at $916.38 per month. Most seniors will also be eligible for the Ontario Trillium Benefit, which will be paid once per year or on the 10th day of each month. Ensure you are applying for all benefits that you may be eligible for to maximize your monthly income.

The next step in creating a budget is to make a list of all expenses incurred in a month. Fixed expenses like rent, insurance and utilities are easy to list. Track the amount you spend on food, gas, clothing, etc. For a couple of months, calculate the average monthly amount spent. Think of annual expenses like Christmas gifts and summer travel and divide the amount spent by twelve to determine your budget’s monthly amount. Seniors are eligible for the Ontario Drug Benefit Program the month after they turn 65, which hopefully covers most prescriptions and other medical expenses.

If your income exceeds your expenses, pay your fixed expenses via Pre-Authorized Payments or automatic transfers as soon as your income benefits are received. Request equal monthly billings from your electricity and gas providers. If you grocery shop weekly, divide your food budget into four and ensure you do not spend more than the weekly allotted amount. Some people find it easier to put the weekly amount in separate envelopes and only spend that amount each week.

If your expenses exceed your income and there is no ability to increase income, you must reduce your expenses. Contact your cable or telephone provider to see if you can reduce services to lower your monthly bill. Consider your “needs” (required necessities of life, such as a place to live and food) versus “wants” (new clothing, entertainment, etc.). Eliminate the wants. Plan your weekly meals and watch for sales and senior discounts. If you are really struggling, utilize your local food banks or Meals on Wheels to ensure you obtain the proper nutrition.

There are many resources available on the internet to develop a budget, and don’t be afraid to ask friends, family or a professional for help. Local not-for-profit credit counselling agencies (like https://www.cfshw.com) will work through a budget with you at minimal costs and have additional resources for seniors. Take the first step for a better financial future today.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)