Updated: Mar 8, 2022
Achieve a Debt-Free Retirement With These 5 Financial Tips
People work hard throughout their lives to save up for retirement, but unfortunately, many individuals enter retirement with a mountain of debt. This is a problem because your savings could end up as payment for your loans, leaving you with far too little money to live on comfortably in your golden years. What can you do to lower your debt before you retire? In this post, we'll share some strategies on how you can start imposing financial discipline on yourself and slowly but surely eliminate your debt.
1. Lower Your Interest Rates
Although interest rates are on the rise, they can also be negotiated; if you're thinking of refinancing or merging your loans or consolidating your credit card payments, this is a good time to do it. You can try applying for a personal loan to pay off your high-interest debt or consolidate your current loans. You can also look into getting a loan with a lower interest rate than what you're currently paying.
2. Create a Budget and Stick to It
Managing money is one of the most important things you'll need to do to make sure you're able to retire debt-free. Make sure to set a budget and stick to it. Track your expenses and make adjustments so that your budget is realistic.
If you think you can't get to where you want to be financially, don't give up. Talk to a financial advisor. They can help you figure out how your financial situation could look in the future with some simple planning.
3. the Avalanche Method
On the topic of savings, you might have heard of the "avalanche method" of debt reduction. The avalanche method is essentially prioritizing the debt you have.
You start by paying off the loan with the highest interest rate first. Once that one is paid off, you'll move on to the next one with the highest interest rate.
You'll pay off the loans with higher interest rates sooner than you would with other methods through this method. You'll also save more money by paying off a loan with a higher interest rate earlier than you would otherwise.
4. Have "Retirement" Money as a Separate Account
Putting money aside for retirement is great. But if you're like most people, you don't have a separate account for this purpose. It is common to have a 401K or an IRA, but those are created to cover your financial needs in retirement.
If you have the means, consider establishing a separate retirement account just for that purpose.
Keep in mind that if you withdraw money from an IRA (or similar account) before you reach 59.5, you'll be penalized by the Internal Revenue Services.
5. Pursue Income-Generating Activities
If you're interested in saving money, you can take some time to pursue some income-generating activities. Selling your stuff on eBay is a great way to earn a little extra money on the side. You can also sell your unused items on Craigslist.
If you feel like you can do better, you can also apply for a second job. This will enable you to save more of your money and earn extra income. If you're already retired, don't forget that you can still earn extra cash by working a part-time job!
Just make sure you don't burn yourself out by working too much. It's not worth it if you end up being sick or exhausted.
Is it possible to retire debt-free? Yes, it is! Just remember, the best way to retire debt-free is to start saving when you're young. Even if you have a lot of debt now, take heart – you can still retire with a lot of money!
To make sure you succeed, start paying off your debt as soon as possible. Also, remember that refinancing your loans and paying off your high-interest credit card balances are great ways to start 2022!
Michael R. Rose is one of the best fiduciary financial advisors in Albuquerque who can help you reach retirement debt-free. Give us a call today so we can help you create a financial plan to fit your life and meet your goals!