Balancing your debt and expenses

Your 40s can be expensive years. You may be paying down a mortgage, maintaining a home, saving for retirement, and putting away money for your children’s education—not to mention keeping up with everyday expenses. On top of this, you may have hit some bumps along the financial road. A job loss, divorce, an illness, or death in the family can all make it difficult to get ahead.

Now factor in the effects of the pandemic, market volatility, historically high inflation, and rising interest rates. Is it any wonder that many people in their 50s are struggling with debt? The good news is that there are steps you can consider taking in the next 5 to 10 years to manage and pay off your debt.

Four strategies to help reduce your debt

1 Consolidate debt

People in their 50s may have more than one type of debt. By consolidating your debt, you may be able to find a lower interest rate and pay off your balance sooner. One option for debt consolidation is the all-in-one account, which allows you to combine your mortgage, personal lines of credit, and any other debts you may have at a competitive interest rate.

2 Evaluate the price versus the cost of big ticket items

Some people don’t fully understand how much debt costs. Different types of debt can carry widely different interest rates. For example, credit card debt is typically among the most expensive and can have an interest rate of 20% or more. On the other hand, secured debt such as a mortgage usually has a much lower rate of interest, but even mortgage rates can jump quickly.

It’s important to understand how much different forms of financing really cost and how much extra in interest costs you may end up paying on top of the price you pay for big ticket items. For example, you may decide to pay for your winter vacation that costs $6,000 on your credit card. Average credit card rates are more than 21%, so if it takes you six months or a year to pay off, you could end up paying hundreds of dollars in interest. This example may not be reflective of your situation, and individual circumstances will vary.

3 Consider downsizing early

Do you feel house rich and cash poor? If your children have left home and you no longer need the extra space, you may want to consider moving to a smaller home. Downsizing may save you money in interest, property taxes, and maintenance costs. This, in turn, could free up cash to pay down debt and to save for retirement.

4 Get professional help

You can work with a financial professional to help you create a plan for controlling or getting out of debt. Two-thirds of workers who have a financial advisor say their debt isn’t a problem, yet only 23% of Gen X have one.¹ A financial professional can help you manage your debt and recommend strategies to address the challenges you may be facing in the years leading up to retirement.

Reducing stress by paying off debt

If you’re in your 50s and dealing with debt, there are steps you can take to help you pay off your obligations before you retire. You can think about consolidating your debts, calculating the true cost of borrowing, downsizing your home, and seeking professional guidance. Taking proactive steps now can help you be more financially secure in retirement.

1 Manulife John Hancock commissioned Edelman Public Relations Worldwide Canada to conduct the 2024 Financial resilience and longevity survey. Manulife John Hancock and Edelman Public Relations Worldwide Canada are not affiliated, and neither is responsible for the liabilities of the other.