How can Baby Boomers pay off debts and remain debt-free forever?
This is a guest post by Patricia Sanders
Being debt-free is just a dream for many Baby Boomers.
Due to the financial crisis in 2008, many people who are now at their retirement age have no savings. Some people have already crossed their retirement age and still working due to lack of savings. Some baby boomers are suffering from poverty in their retirement due to huge debt. They have already lost their property in bankruptcy to get out of the debts.
A large number of baby boomers are receiving Social Security checks and debt collection notice at the same time. They are not able to manage their medical cost and due credit card bills while managing other household costs.
According to the report The Plastic Safety Net by public policy organization Demos, in the year 2012, baby boomers aged 65+ had $9,283 average credit card debt. Now the Experian’s State of Credit 2016 report also revealed that Boomers have higher average credit scores than Millennials. But they have almost double the average credit card balance.
Credit card debt is restricting a large number of seniors to announce their retirement. They want to enjoy their golden age without worrying about their debts. If you are one of them who want to retire debt-free, then you have to know the ways to tackle your current debts first.
12 ways you can get out of credit card debt to retire debt-free:
First of all, DON’T PANIC.
It’s ok if you have debts. Nothing to worry about it. Just be patient and keep calm. Having debts is already depressing, and if you panic, it could make the situation worse. Instead, think of how you can eliminate your debts quickly.
Sit down and calculate how much debt you’ve acquired till date. I know it feels exhausted to sit down and count bills. But I guess, you have no other choice. You owe money to your creditors, and they won’t leave you until you pay back all their money.
Take out a consolidation loan to pay off all your debts
If you have multiple debts, then you can take out a consolidation loan to pay off all debts. After that, you just need to manage only the new loan. However, you should try to take out the loan with a low-interest rate. Shop around to get a low-interest consolidation loan.
Follow the debt avalanche method
If you have multiple high-interest rate credit card debt, then you can follow the debt avalanche method to get rid of the debts fast. By following the debt avalanche method, you can pay off your debts on your own. You just need to know how this method works.
In the debt avalanche method, you need to arrange your debts from the highest interest rate to the lowest interest rate. Now you need to make larger payments to the highest interest debt while paying the minimum to the other debts.
Once you repay the highest interest debt, start making large payments to the second highest interest debt. Don’t forget to pay minimum payments to the other debts. Keep following the method until you repay all the debts.
Sign up for a debt relief program
Becoming debt free is not a child’s play. You may not be able to learn a new debt repayment method to get out of the debts on your own. Thus, you can consider professional debt relief help to get out of the debt faster. You can get the best solution to eliminate debt by enrolling in a professional debt relief program.
You can consider debt consolidation or settlement depending on your financial ability and the size of the debt. If you are not sure which debt relief option can be good for you, then you can go fo the credit counseling. They will scrutinize your present financial condition and suggest you the best debt relief option for you.
Prioritizing your payments is a must. Whether you pay the high-interest debt first or the lowest bills first, you should make minimum payments on all your debts except targeting one debt. If possible, pay a few dollars extra on your debts to get rid of them fast.
How can baby boomers stay away from future debts in their retirement?
If you are moving closer to your retirement, then you should try to save more and more. It will help you to avoid further debts in your retirement. However, most of the baby boomers don’t have enough savings. Thus, they should avoid debt at any cost to stay debt-free in their retirement.
Here are some ways you can avoid debt in your golden years.
Stop borrowing money
If you don’t have enough cash to buy something, then don’t buy it now. Whatever might be the reason, you shouldn’t borrow a single penny from anyone or anywhere. If you do so, you’d pile up more balances and find difficulty in paying them. Wait for some time and buy when you have money. Try to cut down unnecessary expenses to set aside money. When you will save enough money for the item, buy it with cash.
Craft a realistic budget
You are retired and want to stay debt-free. So now, it’s time to scrap the old budget that you were following and create a new realistic budget that would cover all your financial goals. Include only the necessary items in our budget. Stick to the budget to avoid debts.
Are you finding it hard to draft a budget? Don’t worry! You can get help from budgeting apps like Mint, Digit, PocketGuard, Wally, Level Money, Spendee, and more.
Use cash as much as possible
There is no alternative to using cash especially when you want to stay debt-free. You tend to spend less and can track your money if you use cash for all your purchases. So, next time make the payment in cash if you buy something.
Avoid using credit cards for daily purchases
Remember, credit cards are not free money. You have to repay the bills. You should try to avoid credit card usage to avoid further debts. If you feel comfortable with credit cards, then make sure you pay the credit card bills in full and within time. Don’t buy an item with a credit card that you can’t afford in cash.
Sell old goods to earn some extra bucks
Few people even work after retirement. If you’re one of them and need money, then sell your old, unused goods to earn extra dollars. Even if you’re working, you can earn money by selling your unused goods in a garage sale. Think about it!
Shift to a smaller place
When you have limited income, you should try to cut down extra cost. Staying in a bigger home can increase your expenses on maintenance and decoration. Moving into a smaller place would free up a lot of money. You have multiple cars, then sell all the cars to avoid losing money on fuel, maintenance, and car insurance. You can stick to one car if you stay far from the city.
Lastly, getting rid of debt doesn’t mean that you’ve to refrain yourself from enjoying life. It’s not possible for anyone to only pay off debts and do nothing else. Find cheap and low-cost entertainments to enjoy your retirement day.
I know, being in debt is really haunting. But, you have to face it no matter what! Nothing is impossible and becoming debt-free is no exception. You need to have faith and believe in yourself that one day you’ll eliminate all your debts and enjoy your retirement wholeheartedly.