May I suggest a 2024 New Year’s resolution? It doesn’t involve diets or workouts or commitments to huge personal transformation.
Take a hard look at your financial situation.
- How much of your available income goes to paying existing credit card balances?
- What expenses for health care, repair, or just household maintenance are you putting off?
- What big dollar items are ahead?
- What have you saved for retirement?
Consider whether a fresh financial start makes sense.
Just getting by
A life of minimum payments, minuscule bank accounts, and no retirement savings is a life fraught with financial danger. One illness or even a short stretch of unemployment can spell disaster.
Too often, my clients try to pretend that all is well if they can make the minimum payments on credit cards. They juggle no-interest offers to move money from card to card.
But debt remains and savings are postponed.
Paying off debt versus paying for old age
Take a look at a little exercise that contrasted paying off a modest credit card debt by making minimum payments with devoting the same about of money to retirement savings.
The results are mind boggling. Paying off $20,000 in credit card debt with minimum payments takes 37.5 years. Put the same money into an IRA for the same period and you have almost $316,000.
You can count on having less income in your old age than while you’re working. Take a look at your annual statement from Social Security and calculate how you are going to live on that amount.
The bankruptcy alternative
Clients walk into my office hoping that I have a magic wand, The Alternative to Bankruptcy, that I can wave and allow them to solve the debt problem without bankruptcy. For most, there is no such secret, unknown cure to debt.
A university study done about 20 years ago found that one in 7 American families would be better off if they filed bankruptcy. At the time, about one in 17 families actually filed. My experiences over 40 years of practicing bankruptcy law suggest that the finding remains true today.
Fear or pride keeps far too many from the rational solution for a difficult situation.
Resolve to take a hard look at your long term financial health. It may be time to swallow your pride, file bankruptcy, and devote the energy now spent on managing debt to saving for the future and enjoying the present.