Although a large number of those who are getting close to retirement are pretty smart about their finances, there are just as many who are carrying debt and may be panicking about how to rid themselves of it. After all, once you’re retired, there is no pay cheque that can be used to reduce debt. Therefore, the funds to pay down debt have to come from elsewhere, which leaves the money you’ve been saving as part of your retirement planning.
But doing this also means that retirement savings will produce less income for you to live on, which can throw all of your retirement planning completely out of whack. So what to do?
Debt Is More Than a Mortgage
You may think that the only debt you have is the mortgage loan on your home. But there could be much more to your debt scenario. Things like personal loans to those you know, and maxed out credit cards can all contribute to your overall debt picture.
Those who’ve wrestled with debt before know there are only 3 ways to get more financially smart: don’t accrue debt, reduce any debt you have and eliminate that debt before you retire.
Living not only within your means, but also below them may provide you with all of the money you need to rid yourself of debt. However, this may require some significant changes. It may help to have a professional come in and take a look at your monthly spending. Such a professional can quickly tell you just how much value you are getting from everything you are buying.
The next step, whether you hire a professional or do it yourself, is to create a budget, and then stick to that budget, no matter what. Because at the end of the day, everyone is on a fixed income, whether they receive a pay cheque or are living off their retirement savings.
Those with several types of debt may be wrestling with letters and calls from creditors. One step that can put you back on the right track is to consolidate your debt. This will result in one dollar amount that will be paid to several creditors each month. And when you have decided to consolidate, most if not all creditor calls and other communications should stop.
You may also wish to consider paying double on your monthly home loan if you are able to. This alone could see you saving thousands of dollars in interest, as well as eliminate many years from your loan’s term.
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