When you look at your money, you really think you have only two options; pay off debt, or save for retirement. But are these the only options you have? Or could you do BOTH?
Take the time to really look at both debt and retirement savings plans:
1. Calculate the debt. There are so many ways to pay off debt, that you can’t claim that there are none that work for you. Find out which one suits your style, work the steps, and calculate the time it will take to finish it off completely.
• It’s important to know your debt before picking an option to pay it off.
2. Add up your retirement savings. Figure out the life you want to have after retirement and how much you need to make that happen. Do you have it? Can you get it at your current rate? If you need help, some online calculators can help you figure out the rate of savings you should be looking at. Or we could also help you figure it out together through our signature, Show Me The Money Workshop.
• Pro Tip: Look at the retirement savings plan offered by your job. Is there something else that can work better for your lifestyle?
3. Tabulate your savings percentage. How much of your paycheck is truly going towards retirement plans? A good rule of thumb is 20%, but that could be higher depending on your age.
4. Get financial help. Just because you don’t know it all, doesn’t mean you can’t. A financial advisor can work with your goal and help you achieve them. They look at your retirement goals, your current debt situation, and your savings plan, and can offer excellent suggestions to make both options feasible.
5. How bad is the debt? If your debt is pulling you down, it’s never going to be possible to achieve financial success. If debt is getting the better of you, it might be important to put everything on hold until you have it under your control, or even completely paid off.
• Should you get behind in your debt repayments, then there may be fees, court orders, garnishments, and other consequences in many parts of your life.
• You might be putting retirement savings on hold, but at the same time, you aren’t putting yourself at financial risk. Although you should have a plan on getting back on track as soon as possible.
6. Pull the trigger. The decision is in your hands as to how you want to work both plans. Should you focus on the future you want? Should you face the debt, you have now? Advice from others is valuable, but it’s your money, and you’re the one facing the consequences. Take ownership of the decision. Now is a good time.
