At Proactive Seniors we are dedicated to sharing great information! This blog is one way for us to pass along valuable research and insights by others, and that is why you will sometimes see guest posts such as this one. We are happy to share the information below, written by Taz Rajan from Bromwich+Smith.
By Taz Rajan, Community Engagement Partner at Bromwich+Smith
Aging, we want it to be graceful and we want to enjoy the finer things in life.
We want to be care-free and have the freedom of time to focus on what matters most such as quality time with our loved ones, traveling the world, living life to the fullest and leaving a legacy behind.
In recent years, the numbers of seniors carrying debt has steadily been climbing and this greatly impacts how seniors live and enjoy their later years. According to Stats Canada, the portion of senior families – those where the main income earner is over the age of 65, with debt, rose from 27 per cent in 1999 to 42 per cent in 2016 and continues to rise.
Some seniors tend to be on fixed or lower incomes and potentially their assets have also taken a nosedive in recent years, resulting in more debt than assets. And some, are leaving debt behind for their families when they pass, rather than an inheritance.
Contrary to popular belief, this is not due to a lack of planning or crazy spending habits. Some seniors support their adult children, become the primary caregiver for their grandchildren, or struggle to make ends meet. There are several other reasons why one may struggle with debt such as current housing market conditions, loss in investments and the overall economy.
The same study indicates that immigrant seniors carry higher debt loads than Canadian born seniors and Atlantic Canadian seniors carry much less debt than seniors in other areas of Canada. Seniors face a myriad of challenges and at the top of that list, it may just be the belief that some do not discuss their finances with outsiders.
Looking at some of the challenges, it is easy to understand why and how seniors can get in over their heads with debt.
How do you know if you are carrying too much debt as a senior?
Here are the five warning signs to watch for:
1. Credit Card debt: You are unable to pay off your credit card balance in full each month or struggle to make your minimum payments.
2. Borrowing Money: You need to borrow money for daily living.
3. Payday loan: You have considered or have already taken a payday loan.
4. Impact on social interactions: Your debt is impacting your work, relationships, mental, emotional, and physical well-being.
5. Shame & Stigma: You often have feelings of shame and stigma that impact your social interactions.
If you saw yourself in one or more of these warning signs, you are not alone. The great news is, there is hope. You can get out of debt, no matter how old you are. Whatever debt relief assistance you need, a licensed insolvency trustee like Bromwich+Smith can help you.
Step 1: Know Your Numbers
To create an action plan to become debt free, you need to know where you are at this moment.
This means gathering up all your credit statements and making a thorough list. The list should itemize each credit product (card/loan/line of credit/private financing) by name, outstanding balances, and interest rates. You can use a pen and paper, excel spreadsheet or even an app, whichever works best for you. The key is to know your numbers.
Step 2: Create a Budget
To decide which action plan is best for you, you will need to have an idea of how much money you have each month or if you have any to apply to debt repayment. Again, use the method that works best for you (check out our Budget blog) and get a clear picture of how much money is coming in each month from all sources and how much is going out to fixed and variable expenses. One thing you may want to pay close attention to is what type of charges are going on to your credit card each month. If these are daily living expenses like rent, you could be in over your head. The goal is to get a clear picture of how much money is coming in and going out each month out of your accounts so you can take the next step.
Step 3: Surplus or Shortfall
Once you have your list of outstanding balances and your budget, you can determine if you have a monthly surplus (money left over each month) or a monthly shortfall (not enough money to cover all commitments).
If you have a surplus, this is great news! You can certainly direct that surplus to debt repayment and once the debt is paid out in full, you can use the surplus for other goals like a trip. In the case of a surplus, you can direct the surplus to paying off your highest interest rate debt first or tackle the smallest debt first to create a win! It takes a little discipline and commitment, but it can be done.
If you have a shortfall, it is time to tweak things. Have a look to see where you can reduce expenses, lower costs, or cut back. Contact your lenders and see if you can negotiate lower interest rates, longer amortization (time to repay in full) or see how you can lower expenses like your utilities. Are there expenses you can delay or put off for a period? This can be a challenging exercise, but the rewards can be sweet. Once you can lower some of your monthly expenses, you can tackle debt more effectively.
Step 4: Ask for Help
One of the bravest things we can do is ask for help to manage our debt. Knowing when to reach out for financial help is the key.
If you answered YES to the warning signs above, you need help. What is the right help and who is the right person or institution to help you? There are many options out there to support you with managing your debt however, it can be very confusing. Many of our clients tell us they are not sure what the difference is between the various debt relief options out there. Every option out there has pros and cons and each option has implications on your time, budget, credit report, and your ability to rebuild. So where do you begin? Licensed Insolvency Trustee firms are federally legislated, licensed and regulated and are the only ones who can administer legal debt forgiveness through consumer proposals and bankruptcies. They are also legally bound to refer Canadians out if they are not, in fact, insolvent. Finally, only a Licensed Insolvency Trustee can provide legally binding protection from your creditors so you can have peace of mind while you rebuild.
Once you have determined that you need debt help, reach out to a Licensed Insolvency Trustee firm, like Bromwich+Smith for a free, no obligation and personalize consultation. You will get the facts, know your rights, and be able to make an informed decision to get out of debt and enjoy your retirement.
At Bromwich+Smith, Debt Relief Specialists are available by phone at 1.855.884.9243 or you can request a call back via the contact us page. There is no need to travel to a local office. Licensed Insolvency Trustee, Bromwich+Smith, is now offering video appointments, with all services available from the comfort of your home.
Taz has been in the finance industry for nearly two decades and has always been passionate about education and empowerment. Having declared bankruptcy herself, she intimately understands the shame, stigma surrounding matters of debt as well as the joy and relief that comes from restructuring. Taz actively works to normalize the conversation of debt through blogs, media interviews, webinars, lunch & learns and through building relationships.