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6 Tips For Dealing With Debt Before You Retire

by:
Sandra Sherk

A recent analysis by the Financial Consumer Agency of Canada (FCAC) reveals that the number of retirees over the age of 65 with a mortgage on their primary residence increased over the past few years, as did the percentage of seniors with credit card debt. In addition, debt-to-income (DTI) ratios among all Canadians are at a record high, and it just keeps growing!

When you retire you tend to have a reduced income, so if you are still paying down debt in your golden years you may find money to be pretty tight. It’s important to deal with this before it becomes overwhelming. The following six steps can help you deal with your finances and get your debts under control and paid off.

1. Stop Using Credit Cards

Stop using your credit cards until your finances are under control—only use cash or debit so you aren’t adding to your debt. But don’t cancel your credit cards; lock them up or cut them up, but keep the accounts open. Why? Your credit limit affects your credit score, and closing them can actually lower your score.

2. Determine Your Monthly Income

Get a clear picture of where you stand financially. Start by determining your monthly income—all the funds you have coming in each month. Next, establish what your monthly expenses are (don’t forget to include the occasional expenses like insurance, car maintenance, etc.). Not sure what your expenses are? Use your monthly bank statements and average out your expenses for mortgage or rent, utilities, insurance, gas, groceries, etc. If you tend to use cash for things like groceries and gas, our Monthly Budget Tracker can help you realistically determine what you spend on these expenses. Also, be sure you include your monthly debt payments in your expenses.

3. Pay Your Debts

Once you know your monthly income, subtract your expenses. If you are in a positive position with surplus funds, start to increase your monthly debt payments to pay them off faster and save on interest charges. 

  • If you owe $6,300 on a credit card with an interest rate of 18% and you make only the minimum payment of $126, it would take you over 25 years to pay off the debt and you would have paid $14,700 in interest.  
  • In that same scenario, if you pay $300 every month, it would only take 26 months (or just over 2 years) to clear the debt and you would only pay $1,324 in interest. That is a savings of over $13,000. You can check this out for yourself by using our Debt Calculator.

4. Consider Part-Time Work or a Side Job

If you find yourself in a negative position when comparing income and expenses, then you have some work to do. If you have investments, speak with a certified financial planner to see if you can restructure the amount you are drawing from your investments each month without jeopardizing your future. If that’s not an option, it may be time to consider some part-time work to earn some extra cash and supplement your income. What are your interests? You may even be able to pick up a job you’d actually enjoy! If you love animals, maybe you could offer dog walking or pet sitting services. If you’re great at knitting or woodworking, perhaps you could sell some of your creations. 

5. Start Cutting Back

You may need to revise and decrease your expenses in order to balance your budget and pay down your debts. Remember the potential savings in #3 above—isn’t that incentive enough to find extra funds each month? Look at each expense line in your budget and ask yourself if the amount can be decreased. There are fixed expenses that you won’t be able to change, but there are many flexible expenses you can adjust. Look at what you are paying for your phones, internet and TV. Can you bundle the services to decrease the cost? Or look at reducing some of the services you have—do you need unlimited everything? Try to decrease your grocery costs by making a list, price matching, clipping coupons, shopping generic brands, and pre-planning meals. Small amounts over a number of items can really add up. Check out our Budget Calculator to see what you can save by reducing some of your expenses.

6. Just Say No

It’s okay to say NO to others. If you have children or even grandchildren, it can be very expensive and detrimental to your financial well-being to be the bank of Mum and Dad or Grandma and Grandpa. You may also need to say NO to yourself once in a while until you get your finances under order.


If figuring out your finances seems daunting, you don’t have to go about it on your own! Book an appointment with one of our certified credit counsellors and let us help you. (It's free!) Maybe you need help establishing a budget to meet your monthly expenses and pay down your debts. Or, you might benefit from our Debt Consolidation Program as a way to repay your unsecured debts. Let’s talk! Help is only a phone call away. Take control now so you’re able to enjoy your golden years and your retirement.

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Topics: Financial Management, Retirement Planning

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