Mar 1, 2012

How to Retire Debt Free


Retirement is a challenge without the need to pay debt left over from our working days.  When I was approached with the opportunity to run this article by a company that can help consolidate loans, I was very pleased.  This is very, very good advice.  Listen up readers!

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How to Retire Debt-Free

Retiring debt free is a smart goal for anyone who is nearing retirement and looking for a way to minimize their monthly expenses. While it can be hard to get everything paid off in a few years, getting rid of debt is one of the best ways to insure that you will not outlive your retirement income. Fortunately, there are a variety of ways to pay off debt quickly.

In order to pay off debt by retirement, it is first necessary to know how much debt you owe. Gather your bills and make a list of all of your debts, including the minimum payments, interest rate, and total amount owed. Next, write out a budget that includes the minimum payments for each of these debts, as well as other recurring expenses such as utilities, rent, and groceries. Once this is done, your budget will tell you if you have any money left over at the end of every month, or if you are unable to meet your minimum debt payments. In the case that you cannot meet your minimum payments, it may be time to call a professional and discuss debt management solutions that will bring your budget back in line.

If you do have money left over, however, it is time to decide how much of it can be used to pay off debt. A general rule is to use your age as the percentage of disposable income that you can devote towards paying off debt. For example, a sixty year old man would want to devote sixty percent of his leftover or disposable income towards paying off his debt faster. As with any rule, however, an individual’s circumstances will determine how much he or she can actually devote towards paying off debt faster.

Once you have determined how much you can pay towards your debts, apply this amount to your bill with the highest interest rate. Be sure to make the minimum payment on the rest of your debt, of course. Depending on the amount of this bill, the debt could potentially be paid off within a matter of months. Once this bill is paid off, the minimum payment amount will disappear from your budget, freeing up cash. Depending on your circumstances, this money can be used to pay off more debt, invest for retirement, or pay for other items. It is typically recommended that after each bill is paid off, however, a consumer adjusts his or her budget. This involves removing the debt from his or her monthly expenditures, and using the “new” leftover money with the same formula as was used before. A portion should go towards debt repayment, a portion towards investment, and the rest towards improving a person’s quality of life.

2 comments:

  1. This is a great write up. The most comment debt will be credit card debt. Here is a good write up of How to Pay Off Credit Card Debt. I think paying off the debt is not limited for retirement. Everyone should work on their bad debts.

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  2. This is a very good point. I did read the article Rliablepm wrote and it is worth your time. Thank you for that.

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