How Seniors Can Deal with Debt Problems
Unfortunately, more and more seniors are finding themselves dealing with debt problems. These issues can be very serious since many seniors are out of the day-to-day workforce and are living on fixed incomes. Dealing with debt in retirement can be very tough.
There are many reasons why seniors end up having trouble with debt. One reason is that many people do not have adequate retirement savings. There was once a time where most people who worked full time were able to comfortably retire off of their company pension plans. Unfortunately, these days, fewer people have company plans and even those who do tend to have plans that are much less generous than in the past.
Another reason for senior debt problems is that many seniors want to help their children or grandchildren financially. For many people, the cost of living is increasing while salaries are not rising to match. This can make getting married, buying a home, or having children a serious financial strain. Many seniors want to help make these costs more affordable, but this generosity sometimes comes at the expense of the senior’s financial stability.
Whatever the reason, there are ways for seniors to avoid debt problems and improve their financial situations. Here are some tips.
Have a Plan
As you approach retirement age, it’s important to come up with a plan for how you will afford your expenses. The amount you’ll need to live will depend on your situation and your expectations. For instance, you’ll need to have more money available if you are making monthly mortgage payments, for example, than if you already have your mortgage paid off.
You’ll also need to think about the sort of lifestyle you’ll want to live in retirement. If you’re planning to travel, for instance, you’ll need to have more money saved than if you picture spending your days tending to your garden. This is also where you’ll need to determine if you want to help your children or grandchildren financially. If you decide that you wish to provide this assistance, this will change how much money you’ll need to retire.
The more preparation and planning you can do before retiring, the stronger financial position you’ll be in when you stop working.
Create a New Budget
Your budget as you approach retirement – and especially as you actually reach retirement – will change from what it was while you were working. You may have fewer expenses, for instance. If you no longer need to spend money on commuting, buying clothing for work, or paying for lunches out with coworkers, that will decrease your budget. Of course, once you stop working, your income will change as well.
This means that it’s important to create a new budget for your senior lifestyle. Determine how much you will earn in retirement from all sources (savings, pension, government benefits, etc.) and then make a budget that allows you to afford your expenses on this income.
Stop Accumulating New Debt
As you get closer to retirement, it’s a good idea to try to become more aggressive when it comes to debt repayment. You should aim to enter retirement with as little debt as possible. To do this, you’ll want to cut your expenses where possible so that you have more money to put toward your debts.
However, while debt repayment is certainly important, it’s also important to stop taking on new debt. Not only is it incredibly difficult to pay off your debt while you’re still adding on more, but any debt that you take on as a senior will follow you into retirement. This can put you in a tough situation. You can avoid senior debt problems by trying to stay away from debt as much as possible as you approach retirement.
Change Your Lifestyle
You may realize that it’s possible to change your lifestyle in retirement and live differently than you did while you were working. For instance, you might decide that you and your spouse no longer need two vehicles. You may even decide to downsize to a smaller home now that your children have moved out. These changes can save you some money, so think about making a lifestyle change if doing so makes sense for you.
By thinking your situation clearly and potentially making changes as necessary, you can restructure your financial situation and avoid senior debt problems.