Tips on How to Retire Debt Free
Retiring with no debt is a smart and financially sound goal for anyone who is approaching retirement and looking for ways to reduce their monthly expenses.
Unfortunately, many people will find it difficult to get everything paid off in the few years before retiring. Getting rid of debt, however, is one of the better ways to make sure that a person will not outlive their retirement income.
Fortunately, there are several different types of debt help that can be used to get out of debt quickly.
In order to pay off debt by the time a person reaches retirement, they must first know how much he or she owes. A person should start by gathering all of his or her bills and making a list of all of their debts. Be sure to include the minimum payment amount, interest rate, and the total owed, otherwise known as the pay-off amount.
Next, a person should write a budget that includes just the minimum payments for each debt. By doing this, the resulting spreadsheet will indicate how much money will be left over at the end of the month that can potentially go towards debt
repayment. If there is no money left over at the end of the month, this means that a person cannot meet their minimum debt obligations. People in this situation may need to call a financial professional to work out a debt settlement or modified debt repayment program.
People that do have money left over, however, need to make a decision concerning how much of it they can use to pay off their debts. Determining this amount is left up to the individual consumer’s discretion, however. A general rule is to use the consumer’s age in years as the percentage of his or her “leftover” income that he or she should devote towards paying off debt. The rest of the money should be used for optional expenses such as entertainment.
People who really need to get out of debt, however, should divide the total amount of their debt by the number of months they have until retirement. If possible,contribute this much every month towards paying off debt. While interest charges
will continue to increase the debt owed, this method will at least get a person within a few months of being debt free by the time he or she retires.
Once a person has determined how much he or she is willing to pay towards his or her debts, apply this whole amount to the bill with the highest interest rate. A person using this method should make sure that he or she makes the minimum payment on all other bills, of course. As soon as this bill is completely paid off, the loan will disappear from the budget. This will free up the cash from this bill to be used for other purposes.
In fact, this money should probably be used to pay off other debt or invest for retirement. After each bill is paid off the consumer should adjust his or her budget. Remove the now paid-off bill from his or her monthly expenditures list.
Then, recalculate the new amount of leftover money and repeat the procedure described above.
About this post's author
This is a guest post written by Suzan Bekiroglu. Ms. Bekiroglu is a published author, freelance writer and editorial consultant for secureloanconsolidation.com. After receiving a Bachelor of Arts degree from the University of South Florida, she faced the mounting obstacle of paying over $24,000 back in student loan debt. Thus, she became determined to eliminate the debt and become very knowledgeable about money management. She seeks to educate others with tips on managing student loans and other kinds of debt, as well as in general personal finance and money saving tips.