No matter how old we are we dream of retirement. Our dream of retirement doesn’t usually have debts. Many individuals don’t think that our debts can out live our careers. It becomes important to some to pay debts now while we are capable of working, instead of waiting until our retirement is a fixed number. Having the ability to travel once retired comes because we retire debt free.
Create a Plan
Having a plan is the first step to have a beautiful retirement. Create a timeline of when you want to retire debt free, what bills you will have to pay off, how much you will need monthly to live, as well as have a planned amount to be in savings for emergencies.
- Unsecured Debts. It is important to pay down your unsecured debts before retirement. This will require a plan to ensure that you will also be able to save in order to retire debt free. You can focus on just one goal (debt or retirement) however focusing on both might be the better option. It is important that you contribute your retirement. The more that you contribute to the retirement savings now, the more saved you will have later.
- High Interest. Whenever you decide to pay your debts down focus on those with high interest can also be critical. Create a plan that will work with your income allowing you to reduce your debt effectively. This can be hard because individuals don’t like to wait in order to pay with cash rather than credit.
- Structured Repayment. There are many agencies that can offer help in debt management. These companies can help you to manage your debt into one simple payment that will reduce your interest, reduce your debt, as well as have a required structured payment due.
- Budget. Create a budget for your household. Include your incomes as well as your expenses. This can be beneficial in the long run, by providing you the ability to plan your debt repayment as well as saving for retirement. Find places that you can reduce your spending to allow more money for eliminating debt or increasing retirement savings.
It can be strange to think that our habits can be changed after having them for so long. However, we are able to readjust our habits any anytime. Before being able to readjust you need to learn what your habits are.
- Evaluate where you’re currently spending money, learn where you’re overspending. By knowing where you’re overspending you will be able to adjust those habits so that you will not be overwhelmed in debt forever.
- Pay off your loans. This can mean your mortgage, car, school, or personal loans. One of the best ways is to make more than the required minimum payment. Paying extra towards the loan can help you pay it off years earlier, while still being able to make the monthly payment if you don’t have the extra one month. Getting rid of those bills you pay in installments, this can make your retirement debt free.
It is important for you to not place yourself into debt further. You will be tempted many times, however incurring new debt can place you back into a negative retirement situation.
- 401K. Do not borrow from your 401K, as this will be undoing the progress that you’re making. Taking retirement money that you have accumulated removing it could set you back to a point where you can’t recover. Remember with percentages removed because of early withdrawal fees and taxes it can take you over 10 years to regain the money that you will be taking out.
- Do not take out new loans that can put you further in debt. Obtaining more debt maybe a situation that is needed if you consolidate debts, or buy a home; however taking out a loan for frivolous needs can be detrimental to retiring debt free.
When you find yourself coming close to a point where retirement is an option, you might want to evaluate if no longer being employed is the proper option. Living off a fixed income can be hard with no extra debt, however to have as well can make retirement unbearable. It is important to remember that food, transportation, utilities, medical expenses, as well as many others will continue to climb with cost of living. However your income will not also rise. You may want to work an extended period of time, on a full or part time basis, until all of your debt has been paid off.
The financial freedom of an individual can make retirement debt free a beautiful event. If are able to evaluate your financial habits, determine the best plan to help you pay debts and save for retirement you will be able to enjoy your financially free retirement.