After many decades of working on their career, raising children, and/or maintaining other responsibilities, most senior citizens are looking forward to retirement and having more flexibility with their lives. However, that goal can be hindered if they’ve accumulated too much debt. According to the Federal Reserve Bank of New York, the amount of debt owed by adults aged 70 or older has grown by 543% over the last two decades! Debt and other money problems can be associated with more stress and unhealthy lifestyles, and can prevent older adults from retiring or pursuing their interests. If you are a senior citizen and are struggling with debt, what should you do about it? Here are five tips that might help.
1. Budget, Budget, Budget!
The first step to solving your money problems is to take a hard look at your budget. Start by figuring out how much you spend on different expenses month-by-month. If you’re still earning income, factor that in; if you’re living off of retirement savings, calculate how much you use. Once you see all your expenses on paper, see if there are areas where you can cut back. Try creating the budget that you’d like to have and compare with your current spending habits. Be sure to focus on paying down debt so that it doesn’t grow. Simple ways to save include cooking at home instead of going out, canceling TV or streaming subscriptions, and joining community Buy-Nothing groups where people offer unused or unwanted items for free.
2. Stop Adding New Debt
If at all possible, you should avoid adding to your debt balance unless absolutely necessary. This may mean leaving credit cards at home to prevent yourself from impulse buys, or it could mean not co-signing loans for family members. If your debt is worrisome, avoid adding to that burden, and instead, focus on paying down high-interest debt. Paying off debt that has a higher interest rate first can save you from paying more interest expense; once you’ve paid off high-interest debt, you can start looking at lower-interest-rate debt.
3. Try a Remote or Part Time Job
If you’re no longer working but are worried about your debt, or if you’re still working but want to ease your way into retirement, getting a remote or a part time job can be a good way to earn income at a less vigorous pace. Additional income that you earn can be put towards paying down debt or saving for future expenses. Working part-time can also be a good way to stay active and connected to your community.
4. Consider Your Housing Situation
As you get older, there are many reasons why you might want to rethink your housing situation. If you had children that grew up and moved out, you may have way more space than you need. Downsizing to someplace smaller could help you save on rent or property taxes, and if you own your home and have built up equity, the money from a sale could help pay off your debt. You may be able to move somewhere with a lower cost of living, where you can get more for your money. If you move to somewhere where most necessities are in walking distance, you could eliminate the need for a car and save on transportation expenses. You can also consider getting a roommate and splitting living costs or earning rental income. Finally, there are programs that are designed to help older Americans with living costs. Any of these options could help you save money and pay off debt.
5. Consult a Financial Advisor
If you need help with your debt, a financial advisor will be able to help you plan a budget that might tackle your debt more effectively. They can also talk with you about options for debt relief. Common debt relief tactics include debt settlement (where your debt is negotiated down to a lesser amount), debt consolidation (where multiple debts are combined to make them easier to keep track off, and potentially lower your interest rate), credit counseling (to help you come up with a repayment plan), and bankruptcy (to clear some or all of your debts). Getting the help you need to handle your finances can reduce stress and set you on the right track.
Bonus: If You’re 60 or Younger
Even if you’re 60 years old or younger, it doesn’t mean that the rising debt for senior citizens doesn’t affect you. You may have parents, grandparents, or other family members dealing with a debt crisis. Furthermore, poor budget choices now could affect you years down the road, when it’s time to start planning for your own retirement. Here’s what you should do to look out for your older family members and to prepare for your financial future.
Reach Out to Older Family Members
It’s easy to miss when older family members are dealing with debt. Pride or embarrassment may stop them from asking for help. Reach out and maintain open communication so that it’s easier for them to let you know if they’re struggling. If you know that an older family member is in a lot of debt, you can help out by helping them with their budget or offering to help them find a financial advisor. You can also offer to drive them to errands, bring over meals, and discuss ways where they can save. Letting your family member know that you’re there for them will be a huge source of comfort if they’re worried about their debt.
Make Smart Money Choices Now
Making smart money choices now will set you up for a better financial situation when it’s time for you to retire. Avoid racking up high-interest debts, be smart with your budget, and always set aside savings for emergency expenses. You should also make sure that you’re contributing regularly to a retirement account, so that you’ll have enough savings for when you’re no longer working. By being smart with your money, you can hopefully avoid the debt that’s plaguing so many older adults. You can also click here to see seven common money mistakes that many people make!