5 Ways to Avoid Debt in Retirement
- Wednesday, March 26, 2014
Did you know...?
- Approximately one in three Americans aged 62 or older is expected to have debt in retirement1
- One-third of people over 65 rely on Social Security for 90% of their income.2
- 32% of retirees have less than $10,000 saved.
- 31% of retirees carry mortgages.3
Forty years ago the financial future for today’s senior adults radically changed. Instead of saving to make a purchase, people in the 70’s had a new option—credit cards. Unfortunately, many seniors are now experiencing the backlash.
In a recent survey people 62 and older were asked how many years it would take to pay off their debt. Here are the results:
Less than one 14%
One to less than five 41%
10 or more 12%
Those nearing or already in retirement will likely face the challenge of living on a reduced income. Additionally, many seniors do not have the benefit of pensions to supplement their income or pay for rising health costs.
While debt is not prohibited in the Bible, these statistics explain why it is strongly discouraged (Deuteronomy 28:43-45). Debt relies upon future income for repayment, and almost always comes with costly interest.
If you find yourself in this distressing situation don’t lose heart. With God’s help there is always hope. Listed are a few practical suggestions.
1. Honestly assess your situation. Write down everything you owe. Denial will only delay the consequences. If you are married it’s wise to assess the debt as a team. It’s not uncommon for one spouse to be a spender, in our situation that would be Laura, and the other a hoarder, that would be Steve. Both extremes are unwise because they reveal an unhealthy reliance on money to meet our needs rather than God.
2. Develop a plan. This can be done using a computer program or paper. There are numerous god systems online. Knowing where you stand financially is the key for working on a debt reduction strategy. For one full month write down every single penny you spend. That list should include small incidental purchases such as: a pack of gum, a cup of coffee at McDonalds, and a newspaper. After thirty days has passed evaluate your list. We believe you will be shocked at how much money is easily frittered away on small stuff.
3. Evaluate your expenses. Similar to a food diet, to quit “cold turkey” on spending is unrealistic. For example, to stop eating out altogether may be unreasonable. But consider how much could be saved if you switched from four nights a week to twice. Add to that ordering water instead of a coke. For a couple that typically amounts to $5.00 per meal. Multiply that two times per week, and after one month it’s $40 that could go towards reducing a credit card payment. And all that was sacrificed is a few drinks!
4. Seek wise, trusted counsel and accountability. This could include a spouse, a friend who is good with finances, a budget counselor, or a professional. Beware: When choosing a professional make certain he/she has your same value system and integrity. This person should not have a vested interest in selling you something. Obtaining insight from a financial planner is a great idea, but remember that being a Christian does not automatically qualify the person as a good financial expert.
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