Seniors In Debt

When Carmen and I started researching for CarePlanIt we were surprised at how many seniors in debt we found. Seniors were taking out lots of loans. Home and car loans were the most ubiquitous. But we also found cosigned loans for children and grandchildren. For ultra-wealthy seniors, these loans weren’t an issue. But for the majority of seniors, they were an issue. In this Section we discuss the issues and ways you can address the issues?

Borrowing is the mother of trouble
Old Proverb

Household Debt Is Growing

Debt in households led by seniors is growing dramatically. In 2001 the average household debt was $12,500. By 2016 it had grown to $31,500. Over 35% of seniors have credit card debt.

When Is Senior Debt A Problem?

Debt is a problem when the interest expenses are unmanageable. Said another way, it is when the senior’s income is not enough to cover their needed expenses and the interest ion the borrowed money. The debt payments impair the senior’s ability to live within their budget. See our Finance Section here for greater details about budgeting.

Why Do Seniors Go Into Debt?

There are many reasons people end up with too much debt. The more common reasons are listed below.

Poor Money Management

Money must be managed. Seniors need to know how much is coming in and how much is going out. This is hard to do you do the following.

Create a budget
Follow the budget
Pay attention to spending
Track spending

Bad Luck

Sometimes you just have really bad luck. You encounter unforeseen health issues or you’re confronted with Acts of God or nature.

Unforeseen medical expenses
Acts of God or nature (natural disasters, etc.)

Bad View of Mortality

We are all mortal. We are dying. This has implications and responsibilities. We should know how long we’re likely;y to live and what it costs to live that long. Pretending this isn’t true or ignoring this reality results in lots of bad behaviors. Some are below.

Our need for money is negligible because I could be dead tomorrow or next week.
I can give everything away, because I don’t need it
Fatalism – whatever happens, will happen

Impulse Contol Issues

Some seniors, like kids, have impulse control issues.

See something, need something (compulsive shopping)
Unable to say no to the requests of others

Cultural Influences

Culture influences behavior. For many seniors spending and what spending purchases is a critical part of how they define themselves.

Keeping up with the Joneses (believes what neighbors have, they need)
Believes expensive objects bring happiness
Changing spending habits represents a decline in status
Parents created bad spending and budgeting models

Results of Too Much Debt

When the interest payments become hard to manage, other things are neglected. Many times, what’s neglected is critical to preserving important things. Here are just a few of the issues senior’s neglect when they’re having difficulty making interest payments.

Putting off needed home or vehicle repairs
Not visiting doctors
Medication reduction (taking fewer pills, or none at all)
Avoiding family and social events
Skipping rent or mortgage payments
Skipping meals or spending less on food

All of these actions have consequences. Some are serious or will become serious over time. Skipping needed medication for example, often leads to declining health that incurs additional expenses. Avoiding car repairs can result in an accident which can increase medical expenses. Skipping meals or eating less healthily can also lead to health issues with associated increased financial costs.

Quick Ideas

Work through our Section on Finances – here.

The National Council on Aging runs a free resource called: EconomicCheckUp.org. Find it here.

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