Your retirement years are supposed to be your years to relax and enjoy the fruits of your labor.
But, what if you go into your retirement with debt? How are you supposed to enjoy yourself knowing you still have bills to pay off?
If you don’t want your retirement debt looming over your head and preventing you from enjoying your golden years, you’ve come to the right place. Read on to discover the top tips for dealing with your retirement debt.
Assess Your Living Situation
If you’re like a lot of other retirees, you’re likely living on a fixed income. If picking up a first or second job in retirement doesn’t sound appealing to you, one thing you can do to start getting rid of your debt is to look for ways to save money.
For most retirees, this means looking at their living situation. If you’re living in a house just meant for a family, but are on your own or are with just one other person, then downsizing is a good idea.
The money you save on living expenses can help you pay off your debt. Additionally, if you sell your home, then you can put the proceeds toward paying down your debt.
Consider a Home Equity Line of Credit
With a home equity line of credit (HELOC), you’re given a line of credit that is secured by your home. This line of credit allows you to pay for large expenses or to consolidate your high-interest rate debt on other loans.
Typically, a HELOC has a lower interest rate than other types of loans, and the interest may even be tax-deductible. However, keep in mind that this is still debt you need to pay, so make sure to take that into account when planning your retirement lifestyle.
Create a Budget
Creating a budget is just as important in retirement as it is in any other phase of your life.
When creating a budget, first look at how much money you’ll be taking in each month from your income, Social Security benefits, pension, etc. Then, take a look at your expenses for each month and use a spreadsheet or an app to track all of your spending.
Choose a Debt Repayment Strategy
Once you’ve figured out how much money you can contribute each month to paying off your debt, consider these two repayment strategies:
For this repayment strategy, you pay the minimum on all of your balances. Then, with any money you have leftover, you pay off your smallest balance first.
Once this is paid off, you move onto your next smallest balance until eventually, all of your debt is paid off.
With this method, you’ll pay the minimum balance on each debt and then put any money you have leftover to the debt with the highest interest rate.
Once this debt is wiped out, focus on the one with the next highest interest rate.
You could also try to consolidate your debt so you only have to worry about one interest rate. You can learn the details of debt consolidation here.
Are You Ready to Take Care of Your Retirement Debt?
Now that you know how to tackle your retirement debt, it’s time to put these tips into action.
Be sure to check back in with our blog for more tips and tricks related to retirement living.