Whether you are already retired or considering it, you need to know if you will have enough money to pay your current bills and have a secure future. While it's tempting to put off taking a long, hard look at your assets, income, debts and spending, you need to summon up the courage to do so. Why? Because that is the first step of how to be the boss of your money after age 60.
Step One – Take an Honest Look in Your “Money Mirror”
You cannot take charge of your finances, if you do not know what they are. Thanks to online access to accounts, you can look up the current balances of your credit cards, car loan, mortgage, personal loans and other debt. Also check the amount of the interest rate and monthly payment for each account.
Step Two – Write a “Reverse Budget”
Instead of writing up a pipe dream of financial austerity that would make you miserable, go through your checking and other accounts and write up a summary of your income and how you actually spend money. Also put on paper how much money you save, invest and put into your retirement account throughout the year.
Step Three – Attack the Debt
Nothing will create a millstone around your neck like debt, when you are on a fixed income. For example, if you are still making a $500 monthly car payment, then that is $500 a month you cannot spend to do fun things now that you have the time.
There are many theories about the best way to pay down debt. The reason there are so many techniques, is that financial management is not “one size fits all.” A strategy that works wonders for you, could be disastrous for your next-door neighbor.
It is generally a good idea to pay off the highest-interest debt first, but not always. For example, if you are close to paying off your car loan and your payment is $500 a month, eliminating that debt will free up $500 every month and reduce your cash flow stress. Run several scenarios for paying off your debt and see how each one will affect your bottom line.
Step Four – Plan for Your Next Chapter
Rather than thinking about retirement from your current job or career as an all-or-nothing situation, be open to the possibility of starting a new business or pursuing some other passion when you retire. Many people find immense gratification from teaching during retirement, sharing their knowledge, experience and wisdom with others. If you earn income from your next chapter gig, you can get out of debt quicker and build up a more substantial nest egg.
Step Five – Rethink Housing Options
Instead of wondering how you will afford your house payment, utilities, real estate taxes, homeowner’s insurance and yard and home maintenance on a fixed income, considering other options could flip your house from a financial burden to a benefit. Many people sell the big house and use the equity to buy a smaller home or condo with no mortgage.
Another option is to stay put but rent out a room, garage apartment or tiny house to provide a stream of income. Some people take out reverse mortgages. However, there are significant risks and downsides inherent in reverse mortgages, so get professional advice, if you are thinking about that option.
With savvy financial strategies, you can take control of your finances and be the boss of your money, instead of feeling at its mercy. The laws are different in every state, and this article is about the general law. Therefore, talk with an elder law attorney near you.
AARP. “Take Charge of Your Money at 60+.” (accessed January 1, 2019) https://www.aarp.org/money/investing/info-08-2013/take-charge-of-your-money-at-60.html