I read an article in the Wall Street Journal (Sept 9, 2011) which said people in their 60s have so much debt they can’t retire. Biggest problem is the mortgage; next biggest is not having saved enough.
For seniors in this position, I can’t help them much. The fact is they have two choices: they must earn more, i.e. continue to work instead of retiring, and/or spend less ($800 apartment vs. $1800 house payment; rice and beans instead of dinner at Applebee’s; one car instead of two).
If you don’t want this to happen to you, here’s my advice for those in their 30’s, 40’s, and 50’s:
Mortgage. Don’t buy more house than you need. Be careful about refinancing because that starts the 30-year clock over again. Your goal should be to have your house paid off by the time you retire. Don’t take out additional loans against the house to buy things you can’t afford. Just like everything else in your family finances, you should have a plan for your mortgage.
Save, save, save! Adopt a modest lifestyle. Remember that the money you receive every payday must pay the expenses today and for some day in the future when your income has stopped. The article mentioned we have a “debt is OK” mentality and that we are living in a “consumption-oriented culture.” Well, debt is not OK. You must live within your means. And we must get off this consumption kick. Don’t buy it if you don’t need it. Don’ buy it unless you already have the money.
I hope those who read this article are paying attention. Everyone must realize that change is necessary now in the way people handle their money now if they want to retire someday.
Preparing for retirement is your number one investment goal. An action plan is needed immediately.
Other articles by this contributor:
How to Prepare for Retirement
Five Smart Steps to Manage Your Family Budget
Does the Money Coach Have an Emergency Fund?