It used to be considered taboo for seniors to carry debt into retirement. That’s no longer the case. An increasing number of Canadians are carrying credit card debt into their golden years. According to StatsCan, 42 percent of senior families had debt in 2016. That’s up from 27 percent in 1999.
If you’re a senior on a fixed income or about to be on a fixed income and you’re not debt free, it’s probably a good idea to pay off your debt as quickly as you can. If and when interest rates eventually rise, you could be in for a cash flow crunch.
In this article, we’ll discuss credit counselling as well as ways for seniors to reduce debt.
What is Credit Counselling?
Credit counselling involves providing you with help through education and debt reduction strategies to get your consumer debt under control. It makes the most sense if you’re a senior who’s struggling to pay the bills. A credit counselling agency is most often a non-profit organization. Its goal is to help you get out of debt.
Credit counselling can be effective, but it takes time. A credit counsellor will work one-on-one with you to figure out the debt relief solution that makes the most sense. The credit counsellor will help negotiate with your creditors, take out a debt consolidation loan and put you in an overall better financial situation.
If you’re a senior who’s deeply in debt or you’re worried that you’re heading in that direction, it can be wise to seek out assistance through credit counselling services now before it’s too late. By enrolling in credit counselling today, you can help get your finances back in line and avoid debt solutions that will damage your credit, such as filing for bankruptcy or consumer proposals.
Ways for Seniors to Reduce Debt
Are you a senior who recognizes that you have a money management problem? A big part of credit counselling is figuring out a way to better manage your finances. With that in mind, here are some ways to reduce your debt and get your debt problem back under control.
Increase Your Payments
The simplest to reach debt freedom sooner is to increase your payments. If you’re on a fixed income this can be tough. However, if you’re still working, this can be an ideal opportunity to pay more than the minimum and get your debts paid off or well under control before you’re on a fixed income.
Don’t just pay the minimum payment. Look for ways to cut back on your spending or increase your income. For example, you could cut back on ordering takeout, get a part-time job or both. Even an extra $50 per month toward your debts can make a big difference.
Debt Management Plan
If your debt situation is a little more serious you might consider a debt management plan. You’re able to sign up with one through a credit counsellor. The Financial Consumer Agency of Canada defines a debt management plan as an “an informal proposal your credit counsellor makes to your creditors on your behalf.”
A debt management plan can help you combine your debts into one monthly payment. In some instances, you may not have to keep paying the interest on your debts, although you’ll usually have to pay back the full amount.
Before signing up for a debt management plan, you need to meet with a credit counsellor. The credit counsellor will do a review of your finances, help you with budgeting and provide you with some pointers on doing a better job managing your finances.
You should think long and hard before accepting a debt consolidation loan to pay off credit cards, lines of credit and other debt. A Home Equity Line of Credit (HELOC) or reverse mortgage may seem like a good solution, however, by taking one of these out you’re potentially putting your house at risk.
When choosing a debt solution, make sure it deals with all your outstanding debt and you can afford the monthly payments. And whatever you do, don’t let your debts grow even more after consolidating them.
Are you a senior dealing with debt and looking for credit counselling? Call us today and we can connect you with a licensed insolvency trustee in your area.