Card Debt and Living on a Fixed Income
on a fixed income can be challenging for anyone – but for
senior citizens, rising health care costs, insufficient retirement
benefits, and longer life expectancies intensify the difficulty.
With limited dollars stretched in too many directions, many retirees
have turned to credit cards to cover the shortfall. As a result,
an increasing number of seniors find themselves having to repay
large balances while still needing to cover necessary living expenses.
The stress this situation causes can be overwhelming. If you are
a senior citizen in this position, there are steps you can take
that can relieve the pressure.
If you are just now finding that your income is insufficient to
pay what you owe, do try to deal with the problem immediately.
Communicating with creditors is almost always better and easier
with a positive credit history and payment record behind you.
If you wait until you miss payments, the debt goes into collections,
or you are in the process of being sued, your options for improving
the situation decrease.
the mean time, if you know you can’t repay what you buy
on credit, try to stop charging until you can. As much as you
may need the supplemental income, credit cards are really short-term
loans, and if you get in over your head, high interest rates and
other fees can make them extremely expensive and difficult to
repay – and make the problem worse in the long run.
Your Whole Financial Picture
is not uncommon for people with financial problems to overlook
some possible ways to increase cash flow. So you know exactly
what you have to work with, analyze your complete financial situation
– you may have more to offer than you think. Your potential
options may include:
life-insurance policy – If you have a permanent
life-insurance policy in which you’ve accumulated a substantial
cash value, you may consider taking a cash-surrender loan to
repay all or part of your debt. You can take out up to 96 percent
of the investment portion while leaving the death benefit intact.
The loan does not need to be repaid – the insurance company
will recoup the balance (plus interest) after you die.
and assets – Having enough money set aside for
future expenses and emergencies is very important. However,
if you have more than that tucked away and are holding onto
high interest debt, you may consider using some of the savings
to erode the balance. You may also consider selling unnecessary
– For some, going back to work is a reasonable and even
attractive possibility to relieve a financial burden. If it
is, your income may not be so fixed after all. However, if you
are not able to work, do not unduly push yourself (or allow
others to push you either). Your health and well being, particularly
at this stage of your life, is too important to jeopardize.
equity/reverse mortgage – Many seniors are homeowners,
and have built up substantial equity in their homes. If you
have, you may consider using it to your advantage. Possibilities
include selling the home and moving into a less expensive place,
taking out a home equity line of credit or second mortgage,
or obtaining a reverse mortgage (a loan against your home that
you do not have to repay as long as you live there). Each of
these options must be very cautiously considered, and entered
into only after you know all of their positive and negative
aware that if your expenses continue to exceed your income,
your problems won’t go away – they will just be
delayed. The last thing you want to do is use up all of your
resources, only to accumulate debt again. Be especially careful
when tapping home equity. If you are unable to make the payments,
you could lose your home to foreclosure.
a workable budget
contacting your creditors, gain a complete understanding of your
finances so you know how much you have to offer. To know, develop
a budget. List how much is coming in every month, and what all
of your expenses are. It is exceptionally important to be realistic
and conservative with your figures.
the total of your expenses from your income. The sum you have
left over (plus anything you can get from other sources, such
as home equity or selling assets) is the amount you can spread
out among creditors. If you are in the red or there is very little
to offer, you could try going back to your budget and reducing
certain expenses to make up for it, at least temporarily. But
if your budget is already pared down to essentials, avoid taking
it down further. On paper you may be able to trim the amount you
spend on groceries, but in reality it may be neither healthy nor
you have a very good idea of how much money you have to offer,
it’s time to contact your creditors:
down a summary of your situation – how you got into debt,
your inability to meet the payment, and how much you can offer
for how long. Be specific and keep to the point. Notes are always
helpful so you don’t get flustered or forget to mention
each of your creditors and ask to speak to a manager or supervisor.
Using your notes, explain your circumstances and proposed plan.
firm. If the minimum payment is $150, and all you have is $50
don’t promise more than you are reasonably able to give.
If you can’t meet the payment, your credibility will be
harmed, making future negotiation more difficult.
a record of the person you spoke with, what was said, and the
date and time of the call.
up your conversation with a letter. Write to each creditor,
again outlining your circumstances and proposal. A handwritten
letter is fine, as long as it is legible. Include supportive
documentation and if you have agreed upon a payment arrangement,
a check (never send post-dated checks). Make and keep copies
of everything. Mail letters from the post office so you can
send it certified mail, return receipt requested.
not take it personally if you receive letters and phone calls
that aren’t exactly polite. It’s not against you;
the creditors do not know you as an individual. They just want
the money and speaking in a gruff way sometimes gets the job done.
Try to not be intimidated or scared.
money is never a good feeling – but when repaying it is
difficult or impossible due to income limitations and high expenses,
the pressure can be terrible. If you are a senior citizen living
with this kind of stress, make sure you take action by exploring
all of your options and offering what you can. This way you can
take pride in knowing that you are doing your very best.