How to budget on a fixed income

A fixed income has one big advantage: it's predictable. Once you know your numbers, you can build a plan that works every month.

Step 1: Know what you really bring in each month

Look at what actually goes into your bank account, not your income before deductions. For a lot of people, the Medicare Part B premium comes out of Social Security before it's paid. In 2026, the standard Part B premium is $202.90 a month.

List every source of income:

• Social Security or SSI
• Pension payments
• Retirement account withdrawals
• Part-time work
• Any other regular income

Step 2: List your fixed and flexible costs

Fixed costs stay about the same and include things like rent or mortgage, insurance premiums, phone service, and internet.

Flexible costs change from month to month. That category includes groceries, gas, utilities, medications, and personal spending.

Add up both to see where your money goes.

Step 3: Plan for the costs that don't come every month

Irregular/unexpected bills are what usually break a fixed-income budget. Think about:

• Property taxes and homeowners insurance (if they're not in an escrow account)
• Car registration and repairs
• Home repairs
• Dental work, eye exams, glasses, and hearing aids (Medicare doesn't cover these)
• Holidays and birthdays

Add up these costs, divide by 12, and set that amount aside each month in a separate savings account so that when it’s time, you’ve got the money on hand.

Example: If you pay $1,200 a year in property taxes, $300 for car registration, and $600 for dental care, that's $2,100 a year. Setting aside $175 a month covers it.

Step 4: Keep a just-in-case fund

Even a few hundred dollars in emergency savings can keep a surprise cost from turning into a debt. If you can, add a small amount each month, even $20.

Step 5: Pay attention to cost-of-living increases

Each January, Social Security benefits get a cost-of-living adjustment (COLA). For 2027, it's 3.6%. That raises the average retirement benefit by about $75 a month.

However, Medicare premiums often rise at the same time, so your actual raise may be smaller than you expect. Don’t plan just for the raise. Know what costs are going up, too.

How can I stretch a fixed income?

• Check what you qualify for. A lot of older adults miss out on help they're eligible for. The National Council on Aging's free BenefitsCheckUp tool can show you programs in your area.
• Lower your Medicare costs. Medicare Savings Programs and Extra Help can help.
• Apply for SNAP. Older adults and people with disabilities can often deduct medical expenses over $35 a month, which can raise their SNAP benefits.
• Get help with energy bills. The Low Income Home Energy Assistance Program (LIHEAP) helps cut costs related to heating and cooling your home.
• Look into property tax relief. A lot of states and counties offer property tax help for older homeowners or people with disabilities.
• Ask about discounts. Phone companies, utilities, transit systems, and a lot of stores offer senior or low-income discounts. The federal Lifeline program can lower phone or internet bills.
• Go over subscriptions regularly so you can cut things that you’re not really using. Compare Medicare plans every fall during open enrollment.

Keep it simple

Budgeting doesn’t have to mean using expensive software or jumping through a lot of hoops. A notebook or your bank's budgeting tool works. The goal is to know what's coming in and going out.