We all want to live a debt free lifestyle and as we age, this need becomes more prominent. When you are in your 40s and 50s, you have probably stopped living life day to day. You begin to prioritize your future more than what is happening right now. By future, we mean your retirement. While some of you may have thought about it when you were younger, most of it were just speculations and plans. Now is the time and age for you to start acting on it. And one of the things that you need to be acting on to prepare for retirement is your debt.
We all manage debt differently in our lifetime and that is because our priorities change as our situation evolves. Those who are in their 40s and 50s have careers, families and have started to acquire personal assets in the form of a house and probably some vehicles. The fact that you only have 15-25 years left before retiring puts the strain on your debt problems. You want to be free from your debts before you retire so you can enjoy it to the fullest. Let us discuss these two different stages to see how you should manage debt and get rid of it entirely.
Solving your debts in your 40s
Your 40s marks a lot of financial responsibilities that you have probably started in your 30s. Most of us have a home and mortgage payments to pay at this stage in our lives. Some are probably still house hunting. The point is, this is usually the time when you seriously think about owning your home and that requires a big amount of money – and in most cases, loans.
Another change that probably put you in debt are your kids. You probably started having them in your 30s and by now, they are growing up and gearing up for college. Raising kids is a huge financial responsibility and even more so when you think about their education. You need to start saving for college if you want to spare your child from the burden of a student loan.
That being said, here are some tips that will help you manage debt in your 40s.
Be ready for the big expenses. We’ve mentioned two of the big expenses already – home loans and your children’s college education. Create a payment plan for your mortgage and a savings plan for your child’s college fund. See how your budget can accommodate both expenses at the same time and seriously consider increasing your income to help finance both and your basic needs at the same time.
Think about your emergency fund. Even if you have an emergency fund, check if it is still enough for you to survive. Remember that the needs of your family also changes. You want to be prepared more than ever because there are some big expenses on your plate right now. If your emergency fund is not enough, you have to start saving up to boost what you have. If you have none – then you have to work double to make sure that you have enough just in case something happens.
Insure your family. Getting insurance is one of the best ways to prepare for an emergency. Instead of worrying about the car breaking down, a sickness in the family or heaven forbid, someone passing away, you want to be prepared for these instances. These are specific preparations that will shave off a huge percentage of the sudden emergency expenses that you could face in the future.
Review your debt payment plans. Even if you have no problems when it comes to how you manage debts, it might be a good idea to look around for debt relief programs. You want to get rid of some of your debts – at least to help make more room in your budget.
Make smarter credit decisions. At this point in your life, you have realized how debt can be a tool that you can use to improve your financial condition. However, you should also know by this time how to choose the right debt. At the very least, keep your credit card spending from occupying a big portion on your budget plan especially if it is made for unnecessary expenses.
Eliminating debt in your 50s
Now that you are past your 40s and in your 50s, you can expect that your priorities will be changing again. At this point, most of your kids are grown up and probably off to college – or on their way to college. It will lower your household expenses but it will also mean your should have more money to help support them while they live their lives away from you. At the same time, you have to start working on your own retirement. More than ever, getting rid of your credit obligations is a must. Manage debt in such a way that will accommodate your new priorities at 50 and beyond.
Get debt relief fast. If you are paying the minimum of your credit requirements, it may be time to step it up a bit. Get debt consolidation or debt reduction if you have to. You only have 15 years before the average retirement age of 65. You want to get rid of all your debts before retiring.
Save up for retirement. Your main priority right now, right beside debt payments is your retirement. You have to maximize your budget and make sure that all of your extra money goes to your retirement money. If you are just starting to put aside money now that you are in your 50s, the amount that you have to put aside will have to be very big. That means you have to lower your standard of living to help keep up with what you have save up for. Use retirement calculators from AARP.org or MSN.com to help you figure out how you will reach your retirement goals.
Think about your sources of income. You may also want to reconsider your career. If you are not earning enough, start putting your money in different investment baskets. This will help secure your income and grow your money too.Also, double check your retirement plans (401k) and Social Security benefits. These are your sources of income while you are retired and it is best to take a look at them as early as now.
- Schedule a general health check up. Now is the time to prepare for health emergencies too. If you have a health insurance, see how that can help you. If it is funded by your employer, find out how you can carry that over even after you stop working for the company. This will help ease the load off of your shoulders. The check up that you will go through will help you determine the amount that you have to put aside for any medical expenses that you will need in the future.