How to approach debt when planning your retirement

For many people, retiring involves getting accustomed to living on a reduced income. And, for those who carry debt into their retirement years, this decrease in revenue can be an issue. But today, we will share helpful information for those planning for retirement and what that means for handling their debt.

Planning Your Retirement When You Have Debt

Here’s how to tackle debt once you’ve stopped working.

1.) Budget

The first step in fixing your financial situation is to make a budget. Begin by figuring out what your monthly income adds to (be sure to include all sources). Then, add up your monthly expenses. After all costs get deducted, what’s left over should then be divided between debt repayment and discretionary spending.

Whether you are planning for retirement or not, consider planning for an emergency fund. In the event of a significant unexpected bill, this can mean the difference between bankruptcy and financially surviving the event. 


2.) Make A Debt Repayment Plan

Coming up with a plan to pay down debt begins by taking a complete inventory of the situation. The method includes evaluating your monthly payments and interest rates for each loan. Once you’ve taken stock, prioritize your debts. After making all minimum payments, any money left over should go to the debt with the highest interest rate. These will typically be unsecured loans, such as credit card loans. This type of debt should get cleared as soon as possible.

Debt consolidation can be a helpful strategy when you’re planning for retirement. Take a look at this post next for some helpful tips about consolidating debt. 

3.) Adjust Your Lifestyle

Making a budget can sometimes reveal that you’re running a deficit. If this is the case, you need to change your lifestyle as soon as possible, especially if your only option to make ends meet is to borrow even more money (for instance, by getting one or more new credit cards).

Downsizing to a smaller home is often a good idea, even if you’re comfortable. In either case, you’re likely to cut down on monthly energy and maintenance costs, and if you’re selling a house, the windfall could give you an edge on your debt repayment plans. As a bonus, a smaller home can also mean more time for spending with your grandchildren, travelling, or on your hobbies than cleaning and maintaining a big house!

Cutting down on outings and charging cable, internet, and phone plans can also help. These decisions can seem complicated at first glance. But when you plan for retirement and pay down debt, they can make a difference. In many cases, making these difficult decisions now can make your future much more comfortable.

 4.) Get Help Planning Your Retirement

You don’t need to tackle debt alone. You can ask friends and family to help you develop a budget and remind you to be accountable. If your situation is overwhelming, consider working with a licensed insolvency trustee. They can offer credit counselling and tell you if a consumer proposal or personal bankruptcy is warranted.

In the meantime, you can also take a look at this article to learn about when you should file for bankruptcy in Alberta. 

Speak With A Licensed Insolvency Trustee In Edmonton

Whether you are planning for retirement now or have already taken this step and you have remaining debt to pay down, we can help. Remember, clearing debt after retirement doesn’t have to be stressful. At the same time, it’s also not something you need to do alone. At Fox-Miles & Associates Inc., we can help you get a clearer picture of your financial situation and the options available to you. Our service area includes Edmonton, Sherwood Park, Fort Saskatchewan, and St. Albert.

Contact us today to get a free consultation and take your first step towards financial solvency.