We all know that everytime we pay a bill, that’s one less payment we make into our own retirement fund. One of the forgotten benefits of bankruptcy is that you can pay yourself, rather than your creditors. People often forget that the payment they don’t make to the credit card company can earn a significant amount of compound interest toward their own retirement.
You don’t have to start big
Credit counseling is required for every individual or couple filing for bankruptcy. While it may be exciting to know that your creditors will be off your back and you will have extra money for your own personal or family needs each month, it is even more important to consider making at least one of those old payments into a long-term individual retirement account.
Here’s how to do it
If you are like most people filing for Chapter 7 bankruptcy, you are likely to get your debt eliminated for five or six different credit cards. On many of these cards, you were probably making minimum payments, maybe as low as $25 month. As soon as your bankruptcy has come through and your debts have been eliminated, sit down with your old monthly statements and determine which one you feel you can honestly replace with a payment to yourself. Don’t get too ambitious. Even $25 month will be more than $300 year, which will earn compound interest.
At just 5% interest in a safe long-term investment, your original $300 will continue to increase with interest and additional payments each year. As you keep “feeding the pig,” your retirement nestegg will grow, to supplement your Social Security, perhaps decades down the road.
And the best part? Because you have been paying the credit card company that same amount all those years, you won’t even feel the pinch in your cashflow.
Talk to an experienced bankruptcy attorney to learn more about ways to start paying yourself, instead of your creditors. I have been helping people in the Memphis metro area get a fresh start for years. I will be happy to show you how easy it is to start down the road to a secure financial future, free from debt.