Fifty years ago, shortly after my wife, Sara, and I were married, my father gave me some unconventional advice about how to organize my family budget.

"Just remember," he said, "your biggest expense will be 'miscellaneous.' "

At the time, I thought he was joking. But over the years, I began to understand what my father was really saying: "You'll have no trouble handling your major expenses. Your problem will be your miscellaneous expenses. If you can't control them, they'll wreck your family finances."

My father's advice, I have discovered, is especially relevant as the holidays approach and we get ready for a season of celebrating and spending. When we go shopping for holiday gifts, we may vow to be prudent, but we are often overwhelmed by the many temptations to spend frivolously.

So I'm not surprised when my miscellaneous expenses go off the chart during the holidays.

The need to keep a lid on spending is a concern that many people share, but it is a special challenge for retirees who, like myself, live on fixed incomes, in my case augmented by my freelance writing. That challenge has become even tougher lately because the value of our investments has declined sharply during the 21/2-year bear market.

Sara and I, for instance, felt more comfortable when our stock in General Electric Co. was worth $55 a share than we do today with the stock trading at less than half that. Sara accumulated the shares when she worked at GE, and they have been a mainstay of our savings.

For the near future, many market watchers predict, investors are likely to see only 5 or 6 percent annual returns on stocks -- not the 28.6 percent annualized return provided by the Standard & Poor's 500 index during the 1995-to-1999 bull market.

That means that many of us will have smaller nest eggs to help us pay our miscellaneous expenses. Clearly, we have entered an era where thrift and cautious spending are the order of the day for all of us -- and especially for retirees.

The key to financial survival is careful budget planning and disciplined spending. Don't let anybody tell you that it's easy. If you don't know how to do this, take the time to learn.

At our house, we divide our budget into two categories: regular monthly expenses and, of course, those miscellaneous expenses.

Regular monthly expenses include such must-pay items as the mortgage, the car payment, bills for electricity and telephone service, and insurance and credit card payments. Because these are relatively fixed expenses, Sara and I know how much money we have to put aside for them each month.

Must-pay items also include our estimated quarterly state and federal tax payments. My next payments will be due around the end of the year -- just as I finish my holiday spending. The timing, I think, could be better.

Our miscellaneous, or variable, expenses include the other costs of daily living: food, clothing, car repairs, home maintenance, dry cleaning, entertainment, travel and out-of-town guests. Because these expenses can be unpredictable, we try to set aside a pool of money and hope it will be large enough to cover the bills that are likely to pop up.

My next step is to assign priorities to our variable spending. Food and car repairs tend to get the highest priority -- you've got to eat, and you need your car. They are followed by dry cleaning and home repairs. Entertainment and travel tend to get the lowest priorities and are easiest to postpone.

Before we retired, Sara and I had the benefit of two full-time salaries. When we retired, we found ourselves living on a reduced income, which made the problem of controlling our miscellaneous expenses more crucial than before.

But we were fortunate. Our salaries were replaced by two Social Security checks, two pension checks and a modest income from my freelance writing. To help pay our miscellaneous expenses, we occasionally withdraw money from our savings accounts and our individual retirement account in addition to the amount we're required to take after age 70. Those withdrawals, as any adviser will tell you, can be dangerous to your financial health. Take out too much money too often and you could run out of money during your lifetime -- not a happy prospect.

So it is wise for current and future retirees to discuss their annual withdrawals with a financial adviser.

The big question facing many retirees is "How can we cut our expenses?" The answer is that there are several ways . Here are some:

* Downsizing. Several years ago, Sara and I reduced our housing costs by selling our five-bedroom house and moving to a two-bedroom high-rise condominium.

While our mortgage payment and condo fee are about the same as the mortgage payment on the house had been, we have saved considerable money on home maintenance and repairs. We no longer have to worry about lawn care, leaf collection, snow removal, replacing the heating and air-conditioning units, patching holes in the roof or scores of other miscellaneous items.

* Mortgage payments. As interest rates have declined steadily, millions of Americans have found it worthwhile to refinance their mortgages. Refinancing can provide a major saving for many homeowners, but especially for retirees who find it hard to make ends meet. A homeowner who goes from a 7.5 percent mortgage to a 6 percent mortgage will save $199 a month on a 30-year $200,000 mortgage. But the process of refinancing usually involves a variety of fees and charges lumped under the heading "closing costs." If you save $199 a month and pay $1,800 in closing costs, it will take you about nine months to break even. It is always advisable when refinancing your mortgage to look at your monthly savings and how long it will take to make up your closing costs.

If it takes too long, you may want to look for a better deal.

* Relocating. Many retirees seek to lower their living costs by moving to a new community. It is a reasonable idea, but it shouldn't be undertaken lightly. Experts recommend that you try to spend vacations in the new area so you can become familiar with the advantages and disadvantages of the community.

Before you decide to move, do your homework. Make a study of the local government, taxes, housing costs, and prices for food and clothing, as well as the medical and health facilities and services available. Another important consideration is whether the community you choose welcomes newcomers and is not insulated against new people. College towns are popular choices for many retirees because they offer both academic and social advantages. But before you move, ask yourself: How will I feel about leaving behind old friends, relatives, children and grandchildren? That is an extremely important question, one you should answer first.

* Eating out. Sara and I have reduced our restaurant visits to about once a week. We also take advantage of the "early bird" prices that are available at many places if you are willing to eat before 6 p.m. There was a time when I would have been annoyed at the idea of having dinner before 8 p.m. But something about growing older seems to demand earlier meals and longer periods of digestion. So it works for us -- gastronomically and financially.

* Food shopping. This is probably a radical idea -- and maybe a male fantasy -- but it seems to me that you can save a great deal of money by carefully planning menus before going to the supermarket. That way, you are likely to buy only what you will need to prepare a specific lunch or dinner. Menu planning also can help one avoid the impulse to buy whatever looks good at the moment, especially when that item may wind up going to waste.

* Transportation. For convenience, Sara and I are still driving two cars.

But many couples we know have gone to one car, even though both partners still drive. Giving up a second car saves money on insurance, gas and oil, repairs, and license fees. The savings can be significant. And if you donate a used car to a charitable organization, you may be able to claim a tax deduction.

* Telephone. Last year, I discovered that I could get a 5-cents-a-minute long-distance rate from AT&T, which was much less than I had been paying the same provider. The company, of course, didn't knock on my door and say, "Oh, by the way, Stan, we can give you a 5-cents-a-minute rate." But once I discovered it on my own, AT&T was happy to give me that rate for $15.90 a month. Even with that charge, I've saved a lot of money on my long-distance calls. The point is that it is worth your while to study the cost of your telephone service -- local and long-distance -- and see whether you can do better with another provider, or even with the same provider.

* Clothing. Like many women, Sara wants her wardrobe to be stylish and practical and she searches for clothing that is suitable for a variety of occasions. Like many retired men, I tend to be happy with one good suit and a couple of sport coats and matching slacks. In retirement, Sara and I don't have to "dress for success," which saves us a good bit of money. But many of those savings help to buy the casual clothes that have become our uniforms in retirement. Fortunately, these days the newspapers and the mail are full of discount coupons, which we can use to trim our clothing expenses.

Having fought the battle of the family budget for almost 50 years, there is no doubt in my mind that the effort to cut back on one's current spending and reduce one's future spending requires either a high level of determination or desperation -- or both.

Either way, it doesn't matter. In the words of the Nike slogan: "Just do it!"

Stan Hinden can be reached at