Tag Archives: Debt Management

Should I Carry some Debt into Retirement?

problem for new retireesThe quick answer to the question, should I carry some debt into retirement is no, if you can avoid it. Obviously who would want to knowingly carry debt into retirement, however, there are lots of people that are retired and are carrying some debt. Whether it is credit card debt or a line of credit, it is another monthly payment that must be made and depending on the interest rate it can also be very expensive. Credit cards carry interest rates of 21% or more on any unpaid balances. Even unsecured lines of credit can be expensive. They typically are higher amounts and the interest rates are higher as well for anything that is unsecured.

Why You Might Answer Yes to the Question, Should I carry some Debt into Retirement

Sometimes life just gets in the way. The best-laid plans are foiled by early retirement. People get laid off from their jobs, are forced to retire early because of health or downsizing. If you find yourself in this situation and you still carry a mortgage, chances are you will carry it into retirement as well.

Many people decide to go on trips when they retire. Some will spend money on the house to freshen it up. There are many ways to spend money and if we are not careful it means we carry it into retirement as debt.

Debt in retirement does not always have to be a bad thing. Obviously we would prefer not to have any debt. Manageable debt that is declining over time through monthly payments is okay. Debt that is used for investments is obviously higher risk, but it can have a tremendous payback.

For most people, if you have debt, try to repay it as quickly as possible. Pay down the highest interest rate debt first. Renegotiate your debt to arrange for lower interest rates and fewer fees. Avoid missing payments. If you must, downsize your home and expenses to focus on reducing your debt as quickly as possible. Avoid spending money that you do not have. Prepare for the day when an emergency will eat up a lot of your savings.

For more about debt reduction in retirement, click here.

How to Reduce Debt

How to Reduce DebtWe recently read a survey which prompted the writing of this post. This web site is dedicated to helping readers manage their debt and to also manage their savings. Consumers need to get involved and take control over their debt and savings to ensure they have a satisfactory financial future. No one else will do it for you. This is about, How to Reduce Debt.

We hope you read this post and can make use of the information as well to take control of your financial future. Failure to act or failure to deal with your debts is only going to cost you more money in terms of interest at the very least and at it’s worst, could push you into bankruptcy!

How to Reduce Debt – Survey

The survey is summarized as follows:

A recent survey indicates that consumers are not taking advantage of available tools and strategies to reduce and pay down their debt.

The reasons given are interesting.

They include:

  • The overall amount of debt that they have
  • Interest rates they pay on their debts  – despite interest rates remaining at near historic low levels.
  • The number of different debts they have as a barrier to debt freedom.

These are all valid reasons for the respondents, however if allowed to continue will stop them from not only paying down their debt quickly, but also cost them much more money as a result of increased interest charges.  Not getting involved and taking charge will possibly hurt you over a life time financially.

What are the tools available to consumers?

These tools include:

  • Consolidation of their debts at a single low interest rate.
  • Making extra payments on their mortgage.
  • Compare mortgage products from more than one lender the last time their mortgage came due.
  • Work with a professional financial adviser
  • A debt repayment plan that includes a specific date for when they expect to be debt-free.

More detail on each of these tools:

Consolidation of debts at a single low interest rate – with interest rates so low at the present time, it only makes sense to consolidate all of your debt into a single low interest rate personal loan or secured mortgage. Interest payments will be less and more of your money will go towards paying down the debt.

Making extra payments on their mortgage – even a single payment once a year can wipe thousands of dollars in interest of your mortgage and years as well off your mortgage. This is a great way to reduce interest and reduce your debt at the same time.

Compare mortgage products – Whether you are consolidating or just renewing a mortgage, a little competition between mortgage companies can sometimes save hundreds if not thousands of dollars. Shop around and let your current provider know so they have an opportunity to sweeten the pot.

Work with a professional financial adviser – if you are confused or overwhelmed with your current debt situation and / or savings, speaking to a financial adviser can sometimes help. They can look at your situation without any emotion, focus on the  facts and make the appropriate recommendations. Get two recommendations from two different advisers to avoid any potential of conflict of interest.

A debt repayment plan

Develop a debt repayment plan in conjunction with the above strategies that indicates what debt will be paid off when. Include what debts should be consolidated and what your long term debt plan will be. Your financial adviser can help develop this plan, however in the plan must be yours and adopted by you.

Reduce your debts now , by consolidating, low interest loans, make extra payments, comparing loan or mortgage products, working with an adviser and setting up a plan. It may take a bit of work. However in the writer’s experience nothing comes easy unless you put some effort into it.

Retirement – Live Well on Less

Retirement - Live Well on LessWhen do you have enough money to retire? What kind of lifestyle will you be happy with?  Will you have to learn to live well on less money? These are questions that millions of baby boomers are asking all around the world and the answers are as varied as there are people on the planet. It is an intensely personal question and most people are stressed out to some degree about the answers.

Depending on your age you may have time to prepare. If you are still in you 40’s or younger, then you have time to prepare and save for retirement. We have a lot of posts on this site that talk about how to go about saving for and planning for retirement. But, what if you are 55 or 60 and suddenly are forced to retire due to health or downsizing at your company? You may not have saved enough money and must make a lot of decisions about what you will do going forward and the lifestyle you will lead. You can still have a wonderful fulfilling retirement with a lot less money than what you planned, as long as you adjust your expectations.

Retirement – Live Well on Less – Some Ideas

We have compiled a few ideas about this stage based on a combination or personal experience as well as from reading a lot of information on the web and talking with friends and colleagues.  Let us know if this rings true for you and or if you have comments or suggestions.

You will have to cope with your situation, what ever it is. Here are six things to think about as you adjust to retirement and learn to live well on less.

  • Fine Tune your Budget
  • Turn Time into Money
  • Live Smaller
  • Move to a lower Cost Area
  • Work Part Time
  • Become Debt Free

Retirement – Live Well on Less – More detail

Fine Tune your Budget

Regardless of how much money you have or receive as pension income, you must balance your spending with this income. This is probably a first step were you take stock of how much money you will take in. You must match your expenses to this income.

You might have to take fewer vacations or different vacations than you planned. Perhaps instead of going on a cruise, a trip by car might be in order. You may have to down size or give up some of the things you took for granted. This is the time to really take stock of what you can afford.

Turn Time into Money

When we are working, we do not have the time to do our own repairs around the home, we do not have time to look for sales and find the best deals. We end up spending a great deal more money as a result. Friends of ours are like this and think nothing of spending money like it will never end.

Once we are retired and living on a fixed income , we have time to do all of these things. A friend once was amazed that I can go on a trip for less than half of what he and his wife paid. It really was quite simple. I looked for a deal and I also was flexible when I  traveled. As a result I saved more than 50% of the cost of the trip compared to my friend.

Look for sales on tools, clothes, food items, travel and whatever you are buying. You can save thousands of dollars by negotiating everything from hotels to furniture.  Look for hotels that include free parking, WI-fi, breakfast and more when you travel.

Apply this simple concept to almost everything you do and you will be amazed at how much money you can save.

Live Smaller

Many people live in a larger home, especially when they are raising a family. Once the family is gone, they really do not need all of that space and cost over head. It may be time to find another home that has a lower cost overhead.

A smaller home will cost less to heat, to cool and to decorate. Taxes should even be less as well. Consider all of these things when you look for something that will reduce your monthly costs.

There is one issue that you must take into account. It does cost dollars to move. These include real estate commissions, legal fees, moving costs and decorating costs. If your savings will not quickly make up for these extra costs you may want to just stay were you are! Compare and make an informed decision before you leap.

Move to a lower Cost Area

Some areas of a city, state or province are known to be expensive, while others are known to be less expensive to live in. Taxes may be less, and the general cost of homes and utilities all may be less. Moving to these areas can also save you money.

We even know one couple who have purchased a home in Mexico because the cost of living is so much cheaper. If you do plan to consider something as radical as moving out of the country there are many things to consider such as immigration issues and health coverage.

Work Part Time

Many retirees are finding that they can make a little play money by going back to work full-time or part-time. This is an excellent way to enjoy your retirement, renew your social life at work, meet new friends and make a little extra money.

some people do  not care about the money. They just want somewhere to go every day and interact with people. Others have to work to make up for the income they have lost. Either way working can be good for you in many ways.

Volunteering is another approach to consider. Money is not a factor, since it is volunteer work you are doing. You are helping the community, you are meeting people and you are getting out several times a week. Many people are afraid of volunteering because it can quickly become a job without pay. The organization begins to depend on you and you feel guilty if you do not go in. Be firm and strike the right balance that works for you and your family.

Become Debt Free

Becoming debt free takes a lot of pressure off of you when you retire. This should be a primary objective for everyone. Just think that if you did not have that mortgage payment or that car loan, just how nice if would be to have that extra money to use for your personal needs.

Transition to one car, move to a smaller home,  work part time , do whatever it takes to become debt free and enjoy the freedom of being debt free.