Nobody enjoys the idea of having to manage credit card debts in retirement.
The idea of retirement is to enjoy all your years of hard work – travel to exotic locations, go skydiving, drive fast cars etc.
The reality is that when most individuals retire, they don’t have enough or any money saved up to live a baller retirement lifestyle.
Many people instead retire with a ton credit card debts that they need to pay off.
Some retirement facts that would shock you:
- A survey from GoBankingRates.com shows that less than half of Americans have up to $10,000 saved up for retirement while 1 in 3 has nothing saved up at all.
- Women are 27% more likely to have no savings than men.
- According to Employee Benefit Institute, the amount of retirees applying for bankruptcy has grown by 7%.
- According to Social Security Administration, by 2033, social security would be cut by 23%.
- Nearly one third of homeowners of retirement age still have mortgage debt.
The closer an individual gets to retirement, the heavier the burden of debt becomes. Reason being that you don’t have a steady stream of income.
Every dollar you spend to manage credit card debts in retirement could have been used on vacations or saved up for your children.
You might not be a able to retire entirely debt free but you can downsize what you owe. That would make your life much easier.
Before we go into the article, you have to understand that they are two kinds of debts you can incure on your credit card.
Revolving debt: This is the kind of debt that comes from credit cards where you carry balance from month to month.
You can borrow as much money as you want and the interest rates are subject to change.
Installment debt: This kind of debt comes from the payments of things like mortgages, student loans, and personal loans.
Majority of the time, the interest rates on these monthly payments are fixed.
For both kind of debts, you have to make payments on time.
Failure to pay and your lender can report you to the credit bureau. The mistake can stay on your credit report for up to 7 years.
Revolving debts can have a huge effect on your credit score. If you carry huge balances from month to month, it would have a negative effect on your credit card especially when you are doing this with multiple cards.
To maintain a good credit score, keep your balances on your credit card as low as possible.
It is very possible to reduce your credit card debt after retirement significantly. And in this article, we would show you 8 strategies that you can use.
8 Strategies to Manage Credit Card Debts in Retirement
When you are retired, there are several unique ways that you can pay off your credit card debts.
Instead of your normal salary, there are several ways you get some income.
You new income can be social security, pension funds, increased health care allocation etc.
Let’s dig into the ways you can pay down your credit card debt putting these new streams of income into consideration.
- Start Budgeting
One of the key things to consider before and even after you retire is budgeting.
Having a budget and sticking to it is an important tool to manage debt.
When starting a budget, important changes would have to be made to your lifestyle.
A budget would allow you allocate your expenses in such a way that at the end of the month you would have some savings.
Tip: Did you know that you would save more when you cook home made meals than going to restaurants?
If you need assistance with budgeting, check out innovative ways to stick to a family budget and tips to help you save even if you are an impulsive spender.
Budgeting would help you know how your finances look like and how to manage your credit card balance.
- Talk with your Credit Card Company
It would be easier for you to pay of your credit card debt when there are no interests accumulating on the money you already owe.
Try and negotiate new credit card rates with your credit card company. You should be ready to live without your credit card to make this realizable.
Tip: When you call the customer care number of your credit card company, the customer care representative might not be able to assist you. Instead ask for the manager in charge of settlement arrangements.
Most of the time when you close a card, the company would allow you to pay the debt over time with little or no interest attached.
Check out this post on how to negotiate credit card debts.
You can also contact a credit counselor if you don’t know how to go about it. They would help you with organizing, managing and negotiating better credit card rates.
As a retiree you would also need to find other sources of income. Check out these posts on 70 legal ways to make money online
- You Can Transfer Your Balance to a New Card
There is no point staying with the same credit card company if their rates are too high.
You should transfer you credit card balance to a new provider that can offer you lower rates.
It is important that you try to pay down as much debt as you can during the promotional period that is usually offered.
If you are still on the fence and wondering which card to go with, use these tips:
- Interest rates (look for 0%)
- Promotion duration that you should be offered (12 – 18 months)
- Credit Score ( Good or b excellent).
- Make sure that the credit limit would be more than your current balance.
5. Review Work Related Expenses
Do you have some expenses that you paid when you were still working?
You might have registered to a gym close to your office to ensure that you exercise. Cancel the gym membership since you wouldn’t be needing it anymore.
Review your work expenses because they might be some things you are paying for monthly without even realizing it. Things you no longer need.
Things like professional association subscriptions, automatic payments like printing paper and ink cartridges etc.
Reviewing these expenses would help you cut down unnecessary spending.
Maybe you haven’t retired, you can check out this article on how to ask for a raise at work. The increase in salary might help you manage credit card debts in retirement better.
- Set Limits to How Much You Can Spend Monthly
It would be easier for you to splurge and make impulse spends when you had a regular paycheck.
Now that you are retired, you have to set a self-imposed limit on the amount of money you can spend every month.
No more impulse spending and purchasing unnecessary luxury.
To track how much you spend every month, it would be beneficial for you to set up alerts with your credit card company.
These alerts would let you know when you have started spending close to your month limit.
You should check out these post on 10 money management apps recommended by experts.
- Find Professional Help for Your Finances
If managing your finances by yourself is taking a toll on you and you find yourself falling into further debt, you should consider hiring a daily money manager.
What would a daily money manager do for you?
- Track your bills
- Manage your checkbook
- Collect tax documents
- Deal with your bills
- And most importantly, protect you from getting scammed.
Depending on your location, a daily money manager can cost between $75 to $100 an hour.
You can check this article by American Association of Daily Money Managers to see a list of money managers by location.
Check out this post on how to improve your credit score.
- Make Extra Cash with Your Home
If you are retired, it is most likely that your kids have moved out and you live in a house alone or with your spouse.
They are several options you can use to make extra money with your home.
You can downsize your big home and move to a smaller place. Use the profits you would make from selling your home and pay of your credit card debts.
If you are looking to do something less drastic and stress free, you can consider renting your home out on Airbnb.
You can rent out some of your empty rooms to tourist and travelers for some fee. This extra cash can go a long way in helping your finances.
You should also do an inventory of your possessions and assets. They are some things that you might have that you don’t use anymore. You can sell such items for extra cash.
There are some items that you might have had for so long that can be a goldmine in recent times.
You can decide to do a garage sell or sell them on eBay for a higher price.
You can also check out these posts on 60 places you can sell things online regardless of the type of item.
- Earn Extra Cash Working from Home
You don’t need to do a 9-5 job before you can work and earn extra money.
You can make money right from your home. It might not be as much a regular job, but it goes a long way to help your finances.
Getting a side gig would assist you in offsetting credit card debts as a retiree without having to go to an office everyday.
Retirement can’t get boring. Having some work to do would keep you busy and active also.
You can read this extensive article on 50 home based business ideas you can start.