When Rachel Manley received notice from the Social Security Administration of a $40 cost-of-living increase in her $213 monthly check, she "thanked the Lord" for the extra income.

But her happiness was cut short when a letter arrived from the District's Department of Human Resources a month later.

"As a result of an increase in your Social Security benefits," the letter read, "your food stamp benefits have been recomputed."

In less than 30 words, the department notified Manley that her $54-a-month food stamp allowance had been cut by $13, or nearly 25 per cent.

"It gripes me, but what can I do?" the 62-year-old Manley asks. "I don't beef about it because I don't want to get in trouble. What if they cut off the little I have?"

Like so many other elderly people in the District and elsewhere, Manley, a childless widow, is struggling to live on federal assistance programs -- Supplemental Security Income and food stamps -- that fail to keep pace with inflation.

For most of the 15,000 persons over 65 in the District who receive SSI benefits, the check they receive each month -- about $238 on the average -- is their sole source of income. Many are also enrolled in the federal food stamp program, which takes into account increases in income once a year to determine a family or individual's monthly allowance.

Like many other elderly people, Manley's health complicates her situation. For years she was a nurse's aid until declining health, diabetes and heart disease, forced her to quit in 1950. In 1963, after a series of heart attacks, she learned she also had cancer. Since then, she has undergone 15 operations for bone, breast and lung cancer. Now, three days a week she makes the 20-minute walk from her efficiency apartment near 14th and R streets NW to Howard University Hospital for chemotherapy, treatment that leaves her "horribly weak and nauseated."

"My life ain't been no bed of roses," the North Carolina native says simply as she discusses her life.

Her husband, a janitor, died several years ago. She went into debt to bury him when his insurance did not cover the undertaker's bill. Finally, after she pleaded for understanding, the mortician dropped the last $200.

Manley's tiny efficiency is dominated by her bed and dining table. All her worldly possessions encircle her, most of them within arm's reach.

Her life is necessarily simple; the only luxury a carton of cigarettes a month. Even necessities must be cut sometimes. Of the $253 she now receives in SSI benefits, $10 is being authomatically deducted each month because of an overpayment during her last hospital stay earlier this year. She pays $100 a month rent, her biggest expense. It has gone up four times since 1973.

After the rent payment, $143 is left to pay for utilities, transportion, medication and personal items.

Manley spreads several utility bills over a wooden table, solemly submitting them for inspection. She shakes her head slowly as she recites the figures.

For the month of June, Manley paid C&P Telephone $10.75, Washington Gas $9.31, and PEPCO $5.87. She is left with $117 after utilities.

Food is her second largest expense. Her food stamps arrive the 8th of the month; she runs out of stamps by the middle of the month. The remainder of the check is spent on items not covered by food stamps: toilet paper, deodorant, soap, detergent, household cleaning items.

She has no money left to save, and cannot afford any entertainment.

A tray filled with pills and other medicines is placed near her neatly-made bed that nearly blocks the curtained entrance to her bathrooom. She explains that while most of her medication is paid by Medicaid, she must pay for her B-vitamins.

"They want over $3 for it," she says incredulously, "and I just don't have it now."

During an interview, Manley rummaged through her vinyl purse to show a reporter its contents: 75-cents.

Once a year, she allows herself to "splurge" and buys clothing -- a pair of shoes, a shirt and blouse -- but generally, she just window shops.

"I go downtown and I see a nice little skirt or something," Manley says, "but I pass it on by, pass it on by."

Almost the same can be said for her grocery shopping. On a recent shopping trip shortly after she received her food stamps, Manley bought a head of lettuce, three tomatoes, a package of Safeway cookies, four apples, salad dressing, and a large jar of instant coffee. She handed the check-out woman a $10 dollar food stamp, and received 13-cents change.

"I can't afford to buy meat," she says, "but I know I need it. I'm so sick of chicken, but it's the chicken that's cheap."

She estimates that the remaining $31 in food stamps last her until midweek, when her sister takes her to do her major shopping. When she does run out of food, which she frequently does, parishioners at her church, St. Stephen of the Incarnate, pack her a basket.

A religious woman, Manley has lined the peeling green walls of her apartment with religious items. In spite of her miniscule budget, she donates $1 each Sunday to the church.

"Rachel is part of the St. Stephen's family, and she's much loved," the Rev. Jack Woodard, pastor of St. Stephens, says of her. "The whole parish is indignant" about the cut in her food stamps. He and others in the District's religious community are planning to "go to war" with the system for Manley, he says.

"If I had to explain the system to her, it would be hard," Jack Schmulowitz, a spokesman for the Social Security office, said. "It's two systems tied to income -- one goes up and the other stays the same."

Schulowitz adds that things should get easier for people like Manley when food stamp allowances increase in January. But for Manley and others, it probably will be only an increase of a few dollars.

Portia Dixon, chief of field services in the D.C. food stamp program, said her office has received numerous complaints about the July notice.

"Many have called to question getting an increase in one (public assistance) program and a cut in another," she said. "For most of our clients it's a hardship."

As for the future, Manley's greatest concern is her rent -- it has gone up four times since 1973 and she expects another increase in the next few months. Despite it all, she still manages a sense of humor that surprises her doctors and friends.

"I just laugh at it," she says, "as if it was a bad joke."