Mortgage rates are usually low, and most people getting close to retirement will get more value by investing and building their emergency fund than by paying off their mortgage faster. Instead, start small and gradually work your way up.įor example, take one vacation a year instead of two, or cut back on the amount of money you extend your adult child to help them out. Maintaining a budget can help you find aspects that need to be fixed in your financial life.Īsk yourself, are you spending more than you can afford? For example, if you spend $100 a week on restaurants, you can easily save that money to pay your dues by making it a habit to plan meals and grocery shopping.īut don’t stop your extra spending, or you’ll risk failing to keep up with the significant change. You can then spot unnecessary expenses, cut down on them and direct that money into paying off your debt.ĭebt.com polled a thousand Americans, and most participants said that they are now tracking their finances, and their budgeting habit has helped them get out and stay out of debt. Writing down your daily expenses in a notebook or creating a spreadsheet of monthly costs will give insight into where your money is going. Create a BudgetĪ reasonable budget is the essence of a fulfilling financial life. And, ideally, also you’re low-interest debts if you start early. This strategy will help you pay off your high-interest debts when you hit retirement. As you knock off one debt after another, keep applying this principle to everything, including your mortgage. Instead of splurging, add the money to the monthly amount you pay on the next debt on your list. Once you pay off a high-priority debt, you will have the extra money in your monthly budget. Now strategically chalk up your budget to pay down the high-interest loans first while keeping up with minimum payments of the rest. Make a list of your debts in descending order starting with the one with the highest interest rate and ending with the lowest. If you are one of them and want to get into retirement debt free, it’s a high goal to achieve.īut, by prioritizing and strategizing, you can significantly reduce the debt burden. Most Americans have a mix of credit cards, student loans, mortgages, and other debts. Tips to Avoid Debt From Ruining Your Retirement Prioritize and Strategize In short, unless you take steps, your debt won’t go away even after your death, and your estate and heirs will be left to bear the burden. And anyone who cosigned a debt or is a joint account holder will still be responsible for those debts after you die.īut creditors usually won’t be able to get to accounts and assets with a named beneficiary or a “payable on death” designation.Ī life insurance policy is another way to ensure that your heirs get something when all your money goes to paying off your debts. Medical bills that remain unpaid at the time of your death can also be taken from your estate. Usually, creditors can use your estate to pay off the debts before your heirs receive any share. State laws vary, but creditors usually have a few months after someone dies to file a claim against the estate for what they are still owed. ![]() Isn’t it Possible to Make Minimum Monthly Payments and Let Debts Die With You? ![]() However, to make the repayment without any financial strain, you must devise a plan. This is because debts like a mortgage or student loans have lower interest rates that you can afford to pay down gradually, even in your retirement. Good debts, or debts that allow you to increase your net worth and improve your life, do not need the same treatment as bad debts. So, allowing bad debts to pile up is a big no-no. Thus, you’ll have less to spend on health care, travel, and leisure activities.Īnd the worst scenario is you’ll end up drawing down retirement accounts faster than planned, run out of money, and face significant lifestyle changes to make ends meet. The situation worsens when those obligations include bad debt.īad debts, like credit card debts and payday loans, carry hefty interest rates that can consume a significant portion of your monthly cash flow. But what’s concerning is when you get into debt without a financial plan, and your obligations keep piling up, threatening to crash into retirement, causing financial stress. So, debt isn’t inherently a bad trade-off. For many, it is the only way to buy a house, pay for education, get a car and fulfill other wants. More than one-fourth of Americans claim they can’t manage their debt, according to a report from OPPLoans.Įveryone lives with some financial obligations, from young adults fresh out of college to retirees in their late 60s.Īnd given the current state of the economy, debt is necessary. Tips to Avoid Debt From Ruining Your Retirement. ![]() Isn’t it Possible to Make Minimum Monthly Payments and Let Debts Die With You?.
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