The future of retirement may look a lot different than our parents or grandparents have experienced. Factors like social security, longevity and our overall financial savvy will greatly affect our preparedness. To successfully create a retirement plan, it’s best to think about it as an equation. And to simplify that equation right off the bat, we’d like to share some tips about how to eliminate debt before retirement.
Debt Management Advice
Get organized. Make a list of every payment and include the total amount that is still owed as well as the interest rate. It’s important to see these numbers on paper and watch how quickly they add up. Consider printing out this household budgeting worksheet to really tally up your spending.
Make a debt elimination plan. There are various ways to do this. You may have heard of the debt avalanche and the debt snowball methods before. Both methods focus on paying as much as you can toward one of your debts, and making the minimum payments to the others. They are both very effective for debt reduction. Here is an infographic comparing the two.
Create your own unique spending plan. Instead of spending based on what you earn currently, adjust your spending to what you could be earning down the road. Will just one of you be receiving a paycheck? What if you had to take a significant cut in pay? Would this plan still work for you? Get accustomed to a life and spending based on those factors, and it will be easy to adjust when and if they do happen. This strategy is an extremely effective way to control your spending, increase savings and reduce debt.
Set a goal and track your progress. Watch that debt you are working towards eliminating get smaller and smaller. Soon enough your debt will be gone, and you can focus on the matter at hand- your retirement.
Your net worth will be of a much greater value to you when the amount of debt you owe is closer to zero. Imagine being debt free by the time you really sit down to plan your retirement. You can’t put a price on peace of mind.
Are you interested in receiving additional advice about budgeting and managing your finances? To speak to a credit counselor directly, call 800-769-3571.