Nine Steps to a Debt-Free Retirement
Do you dream of the day when your house mortgage is paid in full? When you no longer carry a balance on your credit cards? When you no longer have to work? If you're like many Americans, dream on.
"Most older households in America still have debt," said Lori Pridgen, community relations director for Consumer Credit Counseling Service of South Texas (CCCS). "In fact, the number of older households with debt is on the way up."
There are lots of reasons for the increase. One is that outstanding credit card balances have ballooned in the last decade. Another is that Americans are taking out second mortgages on their homes to get extra money. The result is that the average amount owed by people 65 years of age and older rose from $8,000 in 1992 to $23,000 in 2000, according to SRI Consulting Business Intelligence in Princeton, N.J.
Don't wait until your best income producing years are behind you to get serious about debt reduction. Retire your debt now so you can start saving for retirement. Here are nine steps from CCCS that will help you have a debt-free retirement:
1. Manage your money. Learn more about personal finance. Check out a money management book from a library or attend a personal finance workshop. Use this information to establish short-term and long-term financial goals. Take time to manage your money on a weekly basis. Learn to prioritize and keep good records.
2. Create a spending plan based on projected monthly income. Write down all your expenses and categorize them by fixed, variable and periodic. An example of a fixed expense is a monthly mortgage payment that doesn't change. Groceries and utilities can be called variable expenses because they fluctuate. Periodic expenses include annual expenses like income taxes and holidays. Use this information to develop a spending blueprint.
3. Keep up with your money. Maintain an up-to-date checkbook ledger. Smart consumers also record credit card purchases in their checkbook ledger. If you have a home computer, you may want to invest in a money management software program like Quicken or Microsoft Money.
4. Create an emergency savings account. It's hard to get out of debt if you have to borrow money every time a car breaks down or a roof leaks. That's why an emergency savings account is so important. You need money for unexpected expenses.
5. Focus on needs - not wants. You don't have to buy everything you can afford. Do you really need a larger house or a luxury car? Can you skip the trip to Europe? Smart consumers live below their means and bank the extra money. This is one of the keys to accumulating wealth.
6. Pay more than the minimum. If you carry a credit card balance, increase the amount you pay each month to pay the balance off quicker. Once the balance is paid, limit charges to items you can pay off in 90 days. Always pay bills on time.
7. Shop for credit. Interest rates have dropped sharply in recent years. If you have a home mortgage, you may save money by refinancing it at a lower rate. As for those credit cards, you may be paying too much if your annual percentage rate is 14 percent or more.
8. Consider professional help. If you can't implement these money management strategies on your own, contact CCCS of South Texas. A certified credit counselor will analyze your situation and make recommendations. To schedule a confidential appointment, call 854-4357 or 800-333-4357.
CCCS of South Texas is a nonprofit, United Way agency and a member of the National Foundation for Credit Counseling. CCCS has been providing free counseling and educational services in the South Texas area since 1969. The agency also offers a Debt Solver Plan to those with severe financial difficulties. This repayment plan is an alternative to bankruptcy. CCCS has numerous offices in the Crossroads, Coastal Bend and Rio Grande Valley.
