How to Approach Debt When Planning Your Retirement
For many people, retiring involves getting accustomed to living on a reduced income. And, for those who carry debt into their retirement years, this decrease in revenue can be an issue.
Here’s how to tackle debt once you’ve stopped working.
The first step in fixing your financial situation is to make a budget. Begin by figuring out what your monthly income adds up to (be sure to include all sources). Then, add up your monthly expenses. What’s left over after all costs get deducted should then be divided between debt repayment and discretionary spending.
Make a Debt Repayment Plan
Coming up with a plan to pay down debt begins by taking a full inventory of the situation. The method includes evaluating your monthly payments and interest rates for each loan. Once you’ve taken stock, prioritize your debts. Any money left over after making all minimum payments should go to the debt with the highest interest rate. These will typically be unsecured loans, such as credit card loans. This type of debt should get cleared as soon as possible.
Adjust Your Lifestyle
Making a budget can sometimes reveal that you’re running a deficit. If this is the case, you need to change your lifestyle as soon as possible, especially if your only option to make ends meet to borrow even more money (for instance, by getting one or more new credit cards).
Downsizing to a smaller home is often a good idea, even if you’re in a comfortable position. In either case, you’re likely to cut down on monthly energy and maintenance costs, and if you’re selling a house, the windfall could give you an edge on your debt repayment plans.
Cutting down on outings and changing cable, internet, and phone plans can also help.
You don’t need to tackle debt alone. You can ask friends and family to help you come up with a budget and remind you to be accountable for it. If you feel like your situation is overwhelming, consider working with a Licensed Insolvency Trustee. They can offer credit counselling and can tell you if a consumer proposal or personal bankruptcy is warranted.