Credit card debt and a pricey car payment keep a busy 50-something from saving enough for retirement; finance pro's solutions
By Lambeth Hochwald Updated: June 7, 2024 If you ask Lisa Walsh what keeps her up at night, she’ll tell you it’s money — or the lack of it and living paycheck to paycheck. The 54-year-old works long hours at her marketing job, but she’s burdened by a high monthly car payment for a new(ish) vehicle that has thrown her budget into freefall. That, plus $20,000 in credit card debt (she’s juggling five cards), brought on by exorbitant medical bills (hers and her dogs) makes it impossible to plan for the future.Walsh isn’t alone. Credit card debt has ballooned to a record $1 trillion in the U.S., according to the Federal Reserve. “The high-interest rates and fees on my cards are dragging me down,” Walsh says. “I’m usually only able to make the minimum payments.”
To the rescue: Bobbi Rebell, CFP, a certified financial planner and author of How to Be a Financial Grownup . Here, she shares the top three solutions to get Walsh back on track so she no longer feels like she’s living paycheck to paycheck.
How to stop living paycheck to paycheck
1. Focus on high-interest cards first to help with living paycheck to paycheck
If you’re juggling multiple cards, prioritize paying off the card with the highest interest rate first because that’s the card costing you the most, Rebell says. Avoid being late to pay any bill at all costs to protect your credit score and always pay the minimums, at least.
TIP: If you think you can pay off a card within, say, 18 months, consider applying for a card offering 0% promotional interest. “By transferring the balance to this new card, you’ll have some breathing room, but only if you can pay the entire balance within the terms of the promotion,” Rebell says.
2. How to stop living paycheck to paycheck: Target recurring costs that add up
If you’re in a budget crunch, look at all your credit card and bank statements to see what recurring fees you’re paying. You’re likely to find things you never use, Rebell says. This includes streaming services (watch Hulu with ads, for example, and you’ll spend less), health apps and digital news sites that may charge more over time without you even realizing it.
TIP: Call each company and ask (politely) for a price cut. “Saying ‘I love your programming, but it’s not in my budget right now’ might convince the representative to offer you another rate for the service,” Rebell says. “Even a six-month price drop can help.”
3. Set aside what you can for retirement so you’re not living paycheck to paycheck
Walsh has been setting aside 5% of her income for retirement, but it’s not enough, given her age, Rebell says. “A lot of 50-somethings think they’ll work forever, but you might not have the choice to work until you’re 70.”
TIP: Experts suggest setting aside 15% of your income annually, but even 1% more can yield benefits over time. If you’re unsure how set you’ll be once you stop working, check an online retirement calculator to see how much you’ve saved—and how much you still need to put into your retirement account. “At this age, it’s key to be as strategic about retirement as possible,” Rebell says.
