A couple of years back, an article in Business Week caught my attention by stating that older Americans -those identified as 55 and over, are filing for bankruptcy at a faster rate than the general population today.
Even more surprising in this category would be the inclusion of those raised during the Depression and World War II and generally recognized as the greatest savings generation this country has ever known. It’s no surprise, however, that the culprit to this situation is the same one that affects most in American society today; credit (a.k.a. credit card debts).
Credit card debt among American’s ages 65 to 69 has grown over an estimated 200 percent the last 10 years alone. And that shouldn’t come as a real surprise. When you can now buy a Big Mac from McDonald’s with credit card, in lieu of cash, you see just the extent to which credit has become a part of our daily life – like it or not.
We don’t have to look very far, however, to finding out why this is occurring to this age group; easy credit, rising healthcare, skyrocketing gasoline prices along with the demise of company sponsored defined benefit pension plans are just a few of the reasons for starters.
Today we are seeing with many older Americans the growing reality of a smaller nest egg of retirement assets than needed to keep up with the cost of living. And don’t forget, one major illness or disability can be the tipping point to turning one’s financial estate upside down.
So why has this happened? And how much debt is too much?
Experts tell us that non-housing debt, including credit card payments, exceeding 20 percent of your income is probably too much. Here are a few key steps to consider in reducing debt and gaining control of your finances again:
» Get the big picture. Write down all your expenses; food, housing utilities, insurance, car payments, credit card payments – everything. And certainly, in light of today’s rising costs, list gasoline. Compare these expenses to your income. Take a fresh look at identifying those expenses you can reduce or eliminate. With this information, draw up a budget and commit to sticking with it.
» Manage credit cards. If you carry balances on several cards, pay down the one with the highest interest rate first. Once that’s done, focus on the next highest rate card and so on. Limit yourself to one credit card. Take the additional cards burdening down your wallet and put them safely away.
» Consolidate Debt. Take out a low interest loan and use the proceeds to pay off debt. Or transfer balances from high interest cards to lower ones. The goal is to have one debt payment each month that is lower than the sum of several payments.
» Negotiate with your creditors. While many state laws prohibiting garnishment of Social Security income, become proactive with those you owe in making alternate payments, reducing interest rates or whatever reasonably possible.
» Develop better spending habits. In today’s rapidly changing financial world, it’s never too late to learn new ideas towards managing your money. And today, with all the resources at our fingertips on the internet, you can quickly and easily pick up a few ideas such as: www.MyMoney.gov.
There’s an old saying that Rome wasn’t built in a day. Getting a handle on your debts won’t be handled overnight either. It just requires a start. With focus, a plan and a healthy dose of determination , today can be your best start towards getting the problem solved.
Ike S. Trotter, CLU, ChFC is a credentialed Financial Advisor in Greenville. Securities an d Investment Advisory Services provided through Woodbury Financial Services, Inc., Member: FINRA, SIPC and Registered Investment Advisor, PO Box 64284, St. Paul, MN 55164. Tel: 800.800-2638. IKE TROTTER AGENCY, LLC and Woodbury Financial Services, Inc. are not affiliated entities.