Saving for retirement is an important financial goal. Creating – and sticking to – a budget is a smart financial plan. But debt is the enemy that can derail your goals. When it comes to financial health, paying off debt is the smartest thing you can do for future success. Many adults with debt carry a great deal of shame and anxiety along with the debt, and they try not to think about how this debt will affect their future. But you can learn how to pay off debts quickly and get your financial health back on track and ready for retirement.
How Debt Impacts Your Retirement
Going into retirement with any debt is risky. During your working years, it’s easy to make the minimum payments and “kick the can down the road”. Saving for retirement feels more important to some, since you only have a finite amount of time. Plenty of people like to focus on using any extra money for retirement savings instead of reducing debt. But debt can destroy a comfortable retirement. It can quickly sap retirement savings, and there won’t be an opportunity to make that up. You want to enter retirement as debt free as possible.
How Debt Impacts Your Financial Health
Borrowing is easy at first. But once you start down the slippery slope, it’s hard to recover. Debt can impact your ability to buy a home, a car, or any other major purchase. Paying only the minimum adds years to the time you’ll need to pay it off, and will, in most cases, double the amount that you borrowed to begin with.
How to Pay Off Debts Quickly
The good news is that you can get out of debt. To start, be brave, and list everything that you owe and how much you can afford to put toward your debt monthly. There are two main strategies for paying off debt quickly. The “debt avalanche” method prioritizes debt by interest rates. You’ll pay off the debts with the most interest first. The “debt snowball” method prioritizes debt by size. You’ll focus on the smallest debt first.
How the Debt Snowball Method Works
The debt snowball method works so well for many people. The idea is that you gain momentum as you pay off debts one by one, and that will motivate you to keep going. You’ll start by looking at the maximum amount you can pay toward debt each month. Pay the minimum on everything except for the smallest debt. Put the rest of your monthly “debt budget” toward that debt until it is completely paid off. Then, take the entire amount you’d paid toward the first debt, and apply it to the next smallest (while continuing to pay the minimums on the other debts). Before long, you’ll be able to apply the entire amount to your largest debt, and you can be paid off before long.
Debt Elimination Tips
First, and most importantly, while focusing on debt elimination, don’t take on any new debt. Take the cards out of your wallet. Do whatever you need to do so that you focus on making your balances smaller, not bigger. Next, call the companies and ask for a lower rate. If you reach out directly and ask for a break on interest rates, chances are good – almost 75% - that you’ll get it. Finally, you may also look into transferring that debt to a low or no interest card. If you can get a year of 0% interest, you will be able to attack your debt much faster. However, the risk is that by transferring your debt you are opening up more available credit. Remember the most important tip and don’t allow yourself to sabotage your good effort.
Debt is a cause of shame for many, but don’t let debt affect your future financial health. Reach out for help from a financial consultant who can help, and start working toward a debt free life in a positive way. We can help. Contact Safe Money Partners to learn more about safe, proven, effective ways to eliminate your debt and become financially healthy.