As your family matures, your financial situation will probably undergo some serious changes. You may be making more money due to career advancements and your kids may be covering some of their own expenses with summer or after-school job income. On the other hand, you may feel a strain with college and retirement looming. All of these reasons make it important to eliminate debt. Here are some tips you can use to move closer to becoming debt free as your family matures.
Prepare for retirement.
If retirement is on your radar, you will need to consider what your debt means for living on a fixed income. If you are close to paying off your mortgage and your car loans, you may be on the right track to retire comfortably. But if you don’t have much equity in your home, if you need to get car loan, or if you are going to help your kids pay for college, you might want to reconsider your financial plan. Think about accelerating your payments so you can get out debt before you retire. It can be hard to squeeze loan and credit card payments in your retirement budget, so preparing to live on a fixed income can be one of the smartest things you can do. With college and retirement approaching, you may also want to talk to a financial planner about getting out of debt. Though it may cost money upfront, the advice of a professional can help you develop a solid strategy for becoming debt free as your family matures.
Use your home to your advantage.
If you are planning to keep working for a while and your home needs costly repairs or your kids are going off to college, you might want to consider what your home can do for you. Using a home equity loan or home equity line of credit may be a less expensive way to borrow money than using a credit card, because the interest rates are often lower and there are tax advantages. Though your debt will increase, it may be easier to become debt free with a home equity loan or home equity line of credit because you may pay less in the long run. Also, if you make renovations or repairs on your home, you can boost your home’s value. Talk to lenders about your options and keep in mind what your debt will mean for your long term plan.
Teach your kids about debt.
This is especially important as your kids are approaching their college years. You will need to teach your kids the difference between smart debt, which is debt that fits within your budget and can further you financially, and dumb debt, which is debt that is unmanageable and does not help you achieve other financial goals. Discuss your family’s plan for college including scholarship and work study opportunities, as well as 529 Plans and student loans. Also teach them about making a monthly budget, avoiding credit card debt and learning about different kinds of loans. The earlier your kids understand what living with debt means for their finances, the sooner they can start making smart financial moves. Teaching your kids about being financially savvy can also help you avoid paying for their mistakes. Remember, too, to lead by example. Be sure that you are properly managing your income and expenses and are on the road to becoming debt-free.
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