INCREASING CASH FLOW BY REDUCING DEBT

When our parents’ generation retired, it seemed as if few of them had debt: no mortgages, no credit cards, no car payments. But that has definitely changed in recent years. The prices of homes increased for years, it was customary to trade vehicles regularly, luxury was the word of the day, and credit was readily available. The reality is that Baby Boomers approaching retirement are carrying mounds of debt. The recession of 2008-2009 ate away much of their savings, so retirement may be delayed or certainly scaled back for millions of people.

Sadly, the number of retirees filing for bankruptcy due to debt has skyrocketed. They believed that their savings would be enough to fund a pleasant retirement and manage their debt. But unexpected expenses such as health issues and home repairs can quickly take a bite out of monthly cash flow.

One way to free up cash flow during retirement is to reduce debt.

• Stop digging. Vow to do without what you can and don’t use credit cards except for true emergencies.
• Pay balances off as quickly as possible. Determine a target date to pay off the card and stick to it.
• If you currently have credit card balances, pay them down. Begin with the card with the highest interest rate, and pay as much extra each month as you can until the balance is zero. Then move on to the next card.
• See if your credit card company will lower your rate. This is getting to be more difficult, but it worth asking about—particularly if you have been a long-time customer with no late payments.
• Do not be late making payments. Many cards will substantially increase interest rates if you are late with a single payment.

Once your credit cards are paid off in full, you will have more cash flow for your monthly budget expenses.