Over 50 and in Debt? Dave Ramsey Says To Do This
Leaving your job and going into retirement is exciting. But it can also be scary – especially if you still have debt to pay. Retirees are faced with the rising cost of living and the need to make their money last, and paying monthly bills can take a toll on your words.
But it’s never too late to pay down your debt, and it’s especially important to do so with high-interest debt, like credit cards. Financial expert Dave Ramsey has offered tons of advice over the years on how to stay out of debt, and people over 50 who are nearing retirement can use his playbook to prepare for what’s next.
1. Adjust your lifestyle
Claiming new loans is a priority. That may mean adjusting your lifestyle so that you are no longer dependent on borrowing to finance your purchases. For example, if you tend to rack up credit card debt that you can’t always pay on food, it’s time to prepare meals and cook at home.
You also need to pay off your existing debts – and doing so may mean making a few more lifestyle changes. Maybe you can trade a high-end vacation this year for a weekend stay at a nearby off-season resort. That way, you can use more money to pay off your debt. Review all your non-essential spending and see what you can cut back on. Then, review what you spend on essentials (think groceries, gas and utilities) and see if there are ways to shop or negotiate costs with suppliers to spend less.
Lifestyle modification is not just about saying no to certain things. You might also consider taking on a side hustle or semi-retirement with a part-time job for a few years before you fully retire. People in their 50s don’t have as much time to accumulate wealth as older people do, so it’s more urgent that they reduce debt aggressively.
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2. Create a budget
Budgeting can help you track your expenses and make sure you don’t overspend. You can use a budgeting app like Monarch or YNAB, or simply create a spreadsheet or write down your budget. This can allow you to put a certain amount of money towards your debt payments, and help limit how much you spend on non-essentials.
Note that financial advisors often recommend having an emergency fund that can cover three to six months of your living expenses. That way, you don’t need to borrow money and fall back into that trap if you end up with unexpected expenses.
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3. Choose a credit strategy
Next it’s time to choose how to attack your debt. A debt consolidation strategy involves paying off high-interest balances first and reducing the interest you pay over time. People who follow this path usually prioritize credit card debt as it is more expensive than most credit balances. Then, you face the debt with the second lowest interest, then the third lowest, and so on.
Another option is the snowball method, which involves paying off your smallest balance first, regardless of the interest rate. This strategy allows you to build momentum, which can encourage you to stick with your plan.
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