Ideally, we would all retire debt-free, but we’re a nation of borrowers. As of December 2016, the average American household debt totals more than $135,000, according to a NerdWallet credit-card debt study. Credit card debt for the average household carrying a balance totals more than $16,000.
Debt is particularly dangerous for those heading into retirement, because it puts pressure on an already limited budget. Yet the Consumer Financial Protection Bureau reports that 30% of homeowners age 65 plus still have mortgage debt. And according to consumer financial information source ValuePenguin, the average credit card balance of Americans 65 and older is $6,351.
Here are some suggestions for paying down your debt before you retire:
Live below your means. Try creating a budget that represents only a portion of your income. If, for example, you earn $6,000 a month, pretend 10% ($600) of that amount doesn’t exist by transferring it automatically into a savings account.
Get an affordable mortgage. The average American’s highest monthly expense is housing; try to keep it low. Work to improve your credit score; it can make a big difference in your interest rate. Refinance when your score – and the economy – can offer you a better interest rate. Remove private mortgage insurance by having at least 20% equity in your home.
Avoid credit-card debt. Credit-card debt can be tough to pay down due to its typically high interest rate. Pay it down as quickly as possible, and from then on, pay it off completely every month.
You’ll find it well worth it when you retire.