Avoiding Debt as a Senior
While your senior years are meant to be a time when you look back on your life and take advantage of the time and money you’ve earned over a lifetime of working, this isn’t always the case. Unfortunately, many senior citizens struggle with debt. Debt can be difficult to deal with and even tougher in your senior years. In many cases, seniors do not earn as much as they did when they were younger. They may not have an income at all. For seniors on a fixed income, affording monthly living expenses can be difficult. If you’re making large debt payments every month, it can become even tougher.
For those who enter retirement with a large debt, retirement savings and money from pensions must be spent on debt repayment, rather than living expenses. This leaves less money to afford life, which can result in many difficulties.
The good news for seniors who are hoping to get out of debt is that options are available. Here are some tips for how seniors can avoid debt and what you can do if you’re already struggling with debt issues.
Whether you already have debt or if you’re trying to avoid getting into debt trouble, it’s a good idea to reduce your expenses. Most seniors who are living on fixed incomes need to learn how to live off less than when they were working. Even if you’re still earning a regular paycheque, it’s a good idea to reduce your expenses now so that you can start putting money aside for retirement and get accustomed to a financial future where you have less coming in every month.
Look at your budget and see what you can live without. You may need to prioritize your spending and figure out which expenses are less important to you. This process will be different for everyone. For instance, if you’re currently spending $200 a month on eating out and $200 a month on entertainment, but you can’t fit both into your budget, one will have to go or you’ll have to cut from both. Which expense is more important to you? Would you be happier cutting out one entirely or would you rather spend less on both? Once you know what matters the most to you, you can make cuts so everything balances. Remember, just because you can afford an expense now, that doesn’t mean you’ll be able to when you retire.
Make a Plan
If you’re dealing with a debt problem or if you’re hoping to avoid ending up with one, having a plan is crucial. The first step is having a budget. Start by writing down how much you expect to earn in your retirement (or how much you earn now if you’re already retired). Then add up all your monthly expenses. As mentioned above, you’ll likely have to make some cuts so that everything balances. The goal is to have some money left at the end of the month, not to spend more than you earn.
A good way to keep on track with your budget is to keep a record of your spending. Whenever you spend money on anything, take note of it in your phone, on your computer, or in a notepad. Then, at the end of each month, analyze your spending. If you’re spending more than you should, look at where your money has gone and use this information to make cuts so everything balances.
Save for Emergencies
Emergencies happen to everyone. These unexpected events often come with costs that you didn’t budget for. If you don’t have anything saved to help you handle emergency situations, you could find yourself getting into debt trouble.
After all, you never know when one of your appliances is going to break down, when your car will stop working, or when you’ll be faced with large medical bills. If you put money aside each month, you’ll be able to cope with such expenses.
Treat your emergency fund like any other bill you pay. Determine how much you want to save and make sure to put this money aside every month. You may want to consider putting your emergency fund into a different account (or even in a different bank) from your regular account. Not only will that make it easier for you to distinguish your emergency savings from the rest of your money, but it will also make it more difficult to dip into your savings to pay for budget shortfalls. Your emergency fund should be for emergencies only.
Know When to Get Help
If you’re a senior struggling with debt, and you’re having trouble getting out, know that there is help available. Speaking with a Licensed Insolvency Trustee can be a good idea. There are options out there, and a professional can help you understand them.