Reduce Credit Debt

And retire happily ever after.

One of the most pressing concerns most people have when they retire is having enough money to live on.  For that matter, it is the biggest concern many of us have all the time.  After all, anything can change our financial stability.  Losing a job, unexpected medical expense or any number of other catastrophic events can drain our money, use up our savings and just make life difficult in general.

Credit has become a fact of life.   Years ago, when the economy was booming, banks would give just about anybody a credit card.  Banks wanted us.  They were our friends and neighbors and just wanted to help us.  All of us have gotten hundreds of credit card offers.  And without planning to, most of us gave in to the lure of all that credit.

We got used to easy credit and forgot that sooner or later, we would have to pay the price.   For some of us, that price was paid after the economy soured and many people were out of work and had little or no income.  Then we discovered, banks are not all that friendly.

Then the question  became “How do we eliminate debt?”.  That question created a whole new industry of credit repair.  Before the economy soured, we did not hear much about credit repair.  It is a valuable service, but a service that many people will not consider using.

Eliminate Debt

So, it leaves the question “how do we eliminate debt?”, especially credit card debt, without going into bankruptcy or defaulting on our obligations?  There are several options.  None of them are rocket science, but all of them take a plan, sacrifice and commitment.  It is really a matter of recognizing the problem and deciding to fix it.

Some options, such as bill consolidation loans, home equity advances or borrowing from the family should be options of very last resort.  These seldom work and usually result in more debt that has to be paid.  The trick is to evaluate all your expenses, cut some expenses and find extra money that you may already have.  This is where the sacrifice starts.

One way to tackle your credit card debt burden is to lower the interest rate while you search for ways to increase your income and reduce your expenses.  If your credit card company will agree to it, then you could use the extra cash to pay off balance earlier.

If you have balances on several cards, make a list of them in descending balance order.  Then decide if you want to attack the highest rate or highest balance debt first. Or make yourself feel good by paying off the one with the smallest balance.  If you choose this option, you can divert the extra cash to another debt.

Another method (and one that worked for us) to bring down the principal on your credit cards is to pay the minimum due plus the interest and any fees or charges.  This way takes longer, but you bring the principal down by at least the amount of the minimum payment and you will soon see the balance come down.

Banks and Credit card companies have started sending out offers for 0% or low interest rates on balance transfers for people with the good credit records.  If you qualify and you can transfer the entire balance on a high interest card, this might be a good option.  Usually though, by the time we are considering how to pay off or eliminate debt, we are out of the highly qualified group.

I don’t recommend a debt consolidation loan, but transferring a high balance to a zero interest card might be worth a try.  Eliminating the interest, even for a short time, will help you pay off credit card debt much faster.  But it takes discipline and commitment to keep this from making your situation worse.

Everyone needs a little help once in a while.  But it is human nature to avoid asking for financial advice or help until the situation is bad and getting worse.  There is a lot of information available and if your situation warrants it, by all means, get help from a professional debt relief organization.  One big problem is that a lot of us are not taught how credit cards work and we use them in place of real money.

As a retiree, I have seen plush times and times that were not so plush.  And I know that having too much debt can be so stressful that it can affect your mental and physical health.  And, taking control of your total finances might seem like an unwanted part-time job.  A few simple ideas may help you streamline your time, orchestrate your finances, and cut back the stress of debt and give you a different perspective on finding extra money you may already have.