Debt is a hard reality for people at any age, but when you are 50-plus it becomes even harder. It’s even more important for those 50 or older to get a handle on paying down their debt while they are still earning an income.
Ideally, consumers should get their debts paid off entirely before retirement. According to Statistics Canada, the fourth quarter of last year showed that Canada’s household debt-to-disposable income ratio hit a record 163%. We are so indebted that paying our debts off before retirement is not our priority, nor is saving for retirement.
In fact, a recent study showed that the average debt level of insolvent 50- to 59-year-olds was more than $84,000. It also showed that consumers 60 and over stated they carried nearly $70,000 in unsecured debt. Our current low interest rates may be the saving grace for these groups and an increase could put them in a terrible financial situation. Coupled with a lower income or limited pension the dilemma of managing debt would seem hopeless for some.
The goal for getting out of debt for 50-plus Canadians should be top of mind in order to enjoy a less stressful retirement. In keeping with this, here are four tips this group should consider:
- Make a list of all your debts. Include your mortgage or rent and loans for credit cards or vehicle, and any lines of credit. Your latest bill statement will show you the amount and interest rate you are paying. By doing this you will know exactly how much you owe.
- Redefine your Budget. Go over your expenses to see where you can reduce some of your expenditures. Is there a way you can live a simpler lifestyle? Can you purchase goods using cash instead of credit cards? To help you build a proper budget, here is a great planning tool: www.occa.ca/ /budgeting/how-to-build-a-budget.
- Stop lending to Dependents. Understandably you want to help your family members if they experience a financial hardship. However, once you reach the age 50 or older, you may not have the healthy income you once had or the time you had to repay debt. Now is the time to start focusing on your own debt repayment and retirement savings, rather than the needs of your dependents.
- Contact a reputable, professional debt management firm to help you resolve your debt. There are many companies out there that may promise to reduce your debt by 70% or more. Furthermore, there is no debt management firm in Canada that offers government debt reduction programs. Make sure you choose a firm that has YOUR best interests at heart and ask what companies fund their operation. Many non-profit companies are funded by “donations” by creditors and credit card companies, so who do you think they really work for when negotiating reducing your debts? They stand to profit more by negotiating in the interest of the creditors. Choose wisely. Whatever company you go with, read the contract and understand it before you sign it.
Retirement can be rewarding if you live debt free. For more great information about how to manage budgets and learn ways to reduce debt, go to our Finance blog and subscribe. A great personal finance resource!.
Trackbacks for this post