Living on a budget is a critical skill, yet many people struggle to master it. According to a 2023 NerdWallet survey, only 23% of Americans say they need a budget to get by every month, and just 13% of baby boomers strictly follow one.
While overspending can be harmful at any age, it’s especially risky for older Americans on fixed incomes, which offer little flexibility for impulse purchases or debt repayment.
Rachel is increasingly concerned about her 85-year-old mother’s spending habits. She and her husband cover her mother’s housing costs and provide a few hundred dollars monthly for other expenses. Her mother receives about $1,300 from Social Security and has some additional income from investments. Rachel’s siblings also contribute occasionally.
Despite these resources, her mother frequently exceeds her budget — spending $300 a month on supplements alone. Rachel believes her mom should be able to live comfortably but is starting to worry about her mental fitness to manage money. However, the family lives too far away to visit regularly. What should Rachel do?
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Overspending in retirement
Overspending is a common issue among retirees, especially as the cost of living rises and Social Security replaces only a portion of pre-retirement income.
According to a 2024 survey by the Employee Benefit Research Institute, credit card debt among Americans aged 62 and older had increased — with 68% of those surveyed reporting they had outstanding debt, a 25% rise since the start of the pandemic. For many, this is driven by inflation and higher living costs.
However, for others, spending can be a form of recreation. There is even some evidence that impulse buying is linked to loneliness and depression.
In Rachel’s case, a face-to-face conversation with her mother may help uncover the reasons behind spending. Her mother might be able to replace the satisfaction of shopping with social activities or hobbies that offer more meaningful engagement.
Financially vulnerable seniors
Older Americans who are lonely and have disposable income face increased risks to their financial well-being — not only from overspending, but also from fraud and scams.
According to the FBI, incidents of elder fraud rose 46% between 2023 and 2024, with reported losses of $4.89 billion. The agency believes the true number is even higher, as many seniors don’t know how to report scams, or feel too embarrassed to come forward.
Protecting older loved ones from fraud is key to safeguarding their financial wellbeing. There are a number of steps you can take, including:
- Freeze their credit with all three major bureaus — Experian, Equifax, and TransUnion — to prevent unauthorized accounts or loans.
- Educate them about common scams, especially those involving phone calls, emails, or social media. The AARP Fraud Resource Center is a helpful tool.
- Report fraud to the local police, District Attorney’s office, and Adult Protective Services if your loved one has been targeted.
Read more: US car insurance costs have surged 50% from 2020 to 2024 — this simple 2-minute check could put hundreds back in your pocket
How to help your elderly parent with their finances
Regardless of your parent’s current level of independence, it’s important to have open and honest conversations about their finances. At some point, you may need to help manage their money or make decisions about their estate.
For this reason, it’s best that you start these discussions early — ideally while your parent is still fully capable of participating. Topics should include budgeting, income sources, and how long their resources are likely to last.
The Elder Care Alliance recommends the following steps:
- Start early and ease into it: Don’t wait for a crisis. Begin the conversation before it’s urgent, and spread it over several casual, respectful discussions rather than in one marathon session.
- Organize documents: Make sure you know where all the important paperwork and passwords are, and check that their accounts are in good standing.
- Establish power of attorney: If you are appointed as your parent’s representative, be sure to notify their bank, Social Security, Medicare, and insurance providers.
- Consult a financial advisor: Managing the details can be complex, so getting help from a professional can reduce the stress and possible costly mistakes.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.