Dealing with Debt Before Retirement

Sooner or later you are going to face the difficult task that many Americans face: paying their debt. The baby boomer generations, those who are on the edge of retirement, have become swamped with credit card debt and even more debt from loans and mortgages. So what should you do to pay them all off without being dried out of money for your own retirement?

Do not borrow money to pay your debt – Some people are so afraid that putting on a budget to pay the savings on debt would sacrifice the lifestyle that they enjoy. So to keep that lifestyle, they ask for money from lending institutions just to pay their own debt. This would actually create more problems in the long run, as your aim should be minimizing the debt that you are paying and not adding more debt to bear.

Create a budget – The word "budget" can send shivers down the spines of many, but it is essential in order to achieve that dream retirement. Having a budget does not have to be restrictive as many may think, but rather as a means to track your spending and income in order to make the most of what you have without going overboard.

Pay off your credit cards – With discipline, you can pay off your credit card debt. If you need some sound advice, get help from a reputed financial adviser. However, if you opt for consolidation or a home equity loan to pay your credit card debt, you need to get rid of the cards so you would not be tempted to use them unnecessarily. Keep a card or two for emergencies, but do not rely on them for impulsive purchases.

Pay ahead – Do not wait for the due date when paying your debt. If you have some extra money, pay them ahead. You might get tempted to spend it on other things.

Do not rely on incentives – A common mistake done by people is to rely on temporary income like overtime pay or bonuses to make ends meet. If you have earned your incentive, put the money on some type of savings account or use it to pay ahead on your bills.

Stick to your plan – Once you have a budget in place and plan to getting out of debt, do not abandon your plan. If times get rough, simply tough it out. An occasional treat may be spent for sticking to plan, but not too often that you fall back into your old habits.

 

Posted by Ardent Editor on Jun 18 2008 in Money 101

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