How To Take Charge Of Your Debt: At Any Age

Retired Couple Venice

“Success consists of going from failure to failure without loss of enthusiasm.”

I love this quote with Winston Churchill. It’s one of several quotes I keep on a piece of paper in my wallet. I think the “attitude” of this quote can help anyone who is in debt. A debt problem can be solved- regardless of your age.

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Debt Amounts For People Over 50

The Wall Street Journal recently reported that the average 65-year old has 47% more mortgage debt than in 2003. That same group had 29% more auto debt than 2003 (both amount are adjusted for inflation).

Now, that’s a big problem- a problem that may seem too big to solve. However, consider the leadership of Churchill and the bombing of London in 1940. It took amazing tenacity to lead England through that terrible time. With that same sort of tenacity, I think people can solve debt problems at any age.

Cut yourself some slack

If you’re in a debt situation, cut yourself some slack. We had a near-financial collapse in 2008. The mortgage crisis created a host of problems. Many consumers were affected by these issues:

  • Easy credit conditions led to people taking on far more mortgage debt than they could afford.
  • The crisis led to job losses in many industries. Losing income due to a job loss put many borrowers behind on their debt payments.
  • Many workers had to take job cuts, or simply earn less money as business owners in a tough economy.

These conditions were particularly hard for older Americans. Older people who lose jobs have a tougher time finding employment. These workers may not have the necessary training to find a job in a new field. This group was at a higher risk of not finding jobs- and falling behind on debt payments.

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Reddit’s good advice

I wrote about Reddit’s list of personal finance steps in an earlier post. Take a look- it’s a great overview of how you can plan financially.

The first step is to find out the extent of the problem. Pull together a list of every debt that you have. Note the dollar amount, interest rate and the required monthly payment. While this can be stressful, finding out where you stand financially is critical.

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Do just one thing

OK, once you have a list, find the debt with the highest interest rate. Commit to paying more than your scheduled payment each month. The higher payment will help you reduce the outstanding principal amount. Less principal outstanding means less interest expense for you to pay.

When we face a big problem, it’s sometimes difficult to know where to begin. Just doing this one thing- one small thing- can boost your confidence and get your started on the right road to paying down debt. It’s not meant to solve everything all at once.

A realistic budget

Once you start getting 1 debt paid down, create a budget. If you want a software app to help you, I wrote about Quicken and some other great tools here. You can also find helpful apps for mobile devices. This doesn’t have to be complicated, however. You can create your budget on notebook paper.

The goal here is to find available dollars to increase the amount you pay toward debt each month.

As I explain here, separate your monthly spending into fixed and variable categories. Your home mortgage and you can loan payments are fixed. While you can pay more to reduce the debts, you can’t pay less than the required amount. To find available dollars, focus on your variable (discretionary) spending.

To create a realistic budget, take a hard look at your discretionary spending. If you buy expensive coffee each morning, maybe you cut back to twice a week. Instead of dining our three times a month, cut back to once a month. You’ll end up with a realistic budget- without cutting everything to the bone.

Reducing debt faster

There’s a payoff here: by cutting your spending and paying down more debt, you reduce your total debt faster. By reducing the principal you owe faster, you pay less interest. When you finish paying the debt with the higher interest rate, move on to the next higher rate. Work on paying down that debt.

This strategy can work for you at any age. With discipline and tenacity, you can pay down your debt and have peace of mind.

As always, this is for information purposes only. Consult with a financial or tax advisor as needed.

Have used any of these ideas? I’d love to hear from you. 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies



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Retired Couple/ Venice Roberto Trombetta, Venice

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