If you are over 55 and in debt you are not alone. The average household headed by someone age 55 or older had $76,679 of debt in 2016 according to the Employee Benefit Research Institute. A survey conducted by SSRS Omnibus on behalf of financial website Bankrate.com found that 19% of baby boomers have a higher credit card balance than the amount in their cash reserve.
Unexpected expenses such as medical are one reason older people have credit card debt. But other, more manageable reasons fall into the mix as well. Many older people with children will help their kids out financially by going deeper into debt. It is very prevalent for older parents to take on debt to help their children with college expenses. According to the Consumer Financial Protection Bureau, the number of student loan borrowers age 60 and older jumped by at least 20% in every state between 2012 and 2017. If you have racked up debt, there are things you can do.
Here are five steps that may help you eliminate debt:
- Make a conscious decision to stop borrowing money
If you want to get out of debt you have to stop buying things with credit. You may have to adjust your lifestyle a bit. When you think “but I need . . .” fill in the blank, reconsider the use of the word need. Is it something you can do without until you save the cash to purchase it?
- Stash $1,000 away for emergencies
When something comes up that legitimately falls into the need category, such as a car repair or a medical expense, if you don’t have some money in savings you will reach for the credit card. When you chip away at your savings though make sure you have a plan to repay yourself for the next emergency.
- Create a realistic budget
Realistic is the key word. Tracking your income and expenditures is vital to creating a plan to get out of debt. Hopefully, after putting your finances down on paper (or in a computer as the case may be) you have a surplus of cash. It can be very disheartening to realize your income does not cover your expenses. If this is the case you must take a critical look at your expenses. Any soft expense must be scrutinized: can you live without cable until your debt is paid off? Do you need the extra data on your wireless plan – can you live without your iPad or tablet until your debt is paid off? Would getting a part-time job help? Is that something you could feasibly do? Remember, these choices aren’t forever. You can go back to cable after your debt is gone – but then again, you may not want to.
- Organize your debt
Planning the way out of debt is paramount to reaching your end goal of no debt. There are two methods to organizing your debt. You can pay debt off by the size of the debt. Choose the lowest amount owed and throw as much onto that bill as you can. This will provide a quick psychic boost as you will know the thrill of eliminating debt. The other method is to organize what you owe from highest interest rate to lowest. Pay off the high interest rate debt first and you will save money in interest in the long run.
- Except for your $1,000 savings, throw all extra cash at your debt
If you have any extra cash, pay down your debt with it. If you get a tax refund, don’t buy that TV you’ve been coveting (you don’t have cable anyway) pay down your debt. The more cash you put toward your debt the faster it will disappear.
Getting out of debt doesn’t have to be all grit and struggle. The North Shore has many free activities. Contact your local Council on Aging to learn about what’s happening in your community and at the Senior Center. With a little planning and imagination, you can save money and pay down your debt. You’ll be glad you did.
Do you need assistance managing your finances? SeniorCare’s Money Management program may be able to help.