Money Use this 4-step plan to save for retirement and pay down your debt

17:01  08 june  2018
17:01  08 june  2018 Source:   time.com

Sharing your husband’s debt might be unwise

  Sharing your husband’s debt might be unwise Sharing your husband’s debt might be unwiseQ: My husband and I still owe $44,000 in student debt between the two of us. We each have our own credit card, and I pay mine off in full every month while he owes $16,000 on his. We own our home together and have maybe $85,000 in equity today. My husband wants to use that equity to pay off our student loans and his credit card debt. I’m not sure that’s a good idea.

Start by measuring your cash flow - then plan to pay down debt , set up an emergency fund, and save for big goals like retirement . Steps 2 & 3: Debt and Emergency Reserves. I pair these because they should happen in parallel.

If you choose to save – and that includes investing for retirement – will you be weighed down with debt for years? Pursuing more than one financial goal at a time is doable. Here are tips to balance saving and paying down debt .

Related video: How to get out of debt: a step-by-step guide [Provided by GoBankingRates]

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Saving at 8%. What about if we run the same figures with an 8% APR return? I use this figure as this is the average return (including dividends) of the FTSE 100 over the My current goal was to pay down all my debts within 5-6 years, but now I’m not so sure. I want to save more for retirement as well.

Six Methods:Learning How to Create a Budget Strategizing to Pay Down Debt Saving for Emergencies and Retirement Investing for Beginners By following some basic steps for doing these things, as well as saving for emergencies and retirement and insuring the assets you’ve worked

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Don’t wait until you’ve retired your debt to save for retirement. The challenge, experts say, is to pay down what you owe and still sock away some savings at the same time.

But what’s the best way to do that without driving yourself and your bank accounts crazy?

“It’s not an either/or,” says Greg McBride, chief financial analyst with Bankrate.com.

If you feel like this is too much, you’re not alone. One third of Americans view debt as a barrier to reaching their financial goals, according to research this spring by Principal Financial Group. But if you allow debt to stand in the way of building your nest egg, you’ll have missed out on the compound growth of whatever you can sock away.

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4 Steps to Paying Down Debt and Saving for Retirement . Step 1: Look at your budget to figure out where you have some flexibility. Use the extra money to pay your debts off faster and give your retirement savings a boost. Bell’s financial planning experts can help you figure out how to pay

Saving this amount each year will help you reach your retirement goals. Start by entering the number of years until you plan to retire from Step 1 on line 1. Next, enter the This worksheet will help you organize your debt so that you can plan how you will pay down each debt and track your progress.

When it comes to debt repayment and saving for retirement at the same time, the principles generally apply no matter your life stage. (But millennials just starting out can take steps to avoid excessive debt in the first place.)

a close up of a logo© Illustration by Sarina Finkelstein for MONEY; Getty Images (1)

Here’s an action plan for any age:

Take Stock

Start with a clear-eyed assessment of what you owe and how much your debt is costing you in interest payments. Tally up your debts and rank them in order from the highest interest rate to the lowest. How much is too much? Non-mortgage debt that exceeds 20% of your take-home pay is generally a cause for concern, says Joleen Workman, vice president, retirement and income solutions, at the Principal Financial Group.

Next, look for areas to cut in your budget. For example, maybe you don’t really need that $200-a-month cable package, or an upgrade on your car. “Your ability to pay off debt relates to the standard of living you’re adopting,” Rhoades says.

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Having a spending plan will work those debt payments into your budget and also help you identify ways to save more for retirement and pay down extra toward debt . + Does It Make More Sense To Pay Off Debt First Or Save for Retirement ?

Getting out of Debt . 4 - Step Plan To Destroy Your Debt . Maybe you could finally fill that retirement account, or save enough to send your kids to college. Buckle down and pay this debt off. This sounds easy, but plenty of people plan and fail to follow through with that plan .

Rhoades believes in tracking your expenses and likes the budgeting software You Need A Budget, which is free for 34 days and then $6.99 costs a month. It’s hard to know where to trim if you don’t know exactly where your money goes, and this program can help you figure it out. There are also several great budgeting apps that can help you assess your spending.

Build an Emergency Fund

Any financial advisor will say you need an emergency fund so a surprise $400 car repair or medical bill isn’t going to send you down a deeper debt spiral. Set up an auto-deduction from your paycheck into a savings account for this purpose, says McBride.

Ideally, experts say you should have between three and six months’ savings socked away in your savings account, or a place you know you won’t touch it unless an emergency strikes. And even $1,000 is better than nothing — the most important thing is to put your savings, however small, on autopilot and let it build over time.

Don’t neglect your debt as you’re building your emergency fund. If you don’t have any extra money from your paycheck to set aside, get a part-time job or sell off some possessions to make extra cash, McBride says. It might not be easy, but the effort involved could act as a deterrent to incurring more debt.

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Saving for Retirement vs. Paying Off Debt . If you’re in debt because of a mortgage rather than credit cards, paying down your mortgage may not be a priority. The One Time You Can Use Retirement Money to Pay Off Debt .

Better yet, it contains a plan for paying down debt and possibly saving money for an emergency fund. His focus at Debt .org is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at bfay@ debt .org.

Tackle High-Interest Rate Debt First

Once you’ve got an emergency fund, you can plow more money toward your debt. Generally, the idea is to put the most toward your highest interest-rate debt, since that’s costing you the most in borrowing costs. One exception might be if you have a small balance on a lower interest rate card that you can knock off quickly for a psychological boost, says Jessie Doll, a certified financial planner and wealth advisor at TIAA.

When you’re ranking your debt, keep in mind that the GOP tax bill passed last year changed the tax deductibility of home equity loans. Interest on that type of debt can now be written off only if it’s used for home improvements. There was no grandfather provision on this, so your current HELOC is going to cost you more in interest if it wasn’t used for that specific purpose, McBride says.

Don’t lose sight of your retirement savings as you’re working through your debt. If you have a pension plan with a company match, try to contribute at least enough to get the match, since that’s free money. But if you truly have no room in your budget for your pension plan even after slashing your expenses, focus exclusively on your high interest-rate debt, some experts advise. Studies have shown that credit card and other non-collateralized debt can contribute to health and marital problems, and paying that down can ease these stressors, says Lucia Dunn, professor of economics at Ohio State University who has researched debt and stress.

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Plan . Retirement : Creating Your Future Salary. Saving for retirement will most likely be the biggest savings goal of your life. Plan . Credit Cards: Paydown Order. Our goal is not only to eliminate your current credit card debt as quickly and efficiently as possible, but Build. Paying Down Your Debt .

While paying down debt should you also save for retirement ? In order to make your plan to pay down debt work, you need to make sure your budget is 100% achievable and that you won’t overspend.

Play Catch-Up

Most millennials have no reason to accelerate their mortgage payments. Mortgage debt is considered “good debt,” and you’re better off putting any extra cash into your 401(k), McBride says. There’s also no rush to pay off your federal student loan debt, which offers deferments, forebearance and other provisions to help borrowers who may have gotten into distress, he notes.

Millennials can take steps to avoid “bad debt,” such as credit card debt, to begin with. A common way you can get in over your head is by buying a house and a car at the top of your budget, says Ron Rhoades, a certified financial planner and assistant professor of finance at Western Kentucky University. Another way is by allowing yourself to put vacations and other discretionary fun on credit cards that you can’t afford to pay off in full.

Pre-retirees may have learned this lesson the hard way. If you’ve finally put bad debt behind you, consider paying off your mortgage before you retire. This is especially the case if you’re down to a relatively small balance, such as $15,000. Eliminating your mortgage payment increases your cash flow in retirement. “There’s a good ROI once you get that debt knocked out,” McBride says.

Related gallery: 14 things retirees wish they’d done differently [Provided by GoBankingRates]

a man wearing a suit and tie smiling at the camera: Some of the best people to learn from are those who have done something already. For retirement, that rule of thumb is quite often proven correct. GOBankingRates surveyed retirees to find out what they would do differently if they had to do their retirement saving all over again.Click through to see what the retirees said, and learn about other common retirement planning mistakes. 14 things retirees wish they'd done differently

I’m a 32-Year-Old Police Officer With Zero Debt. Here’s My Plan to Retire in 10 Years .
Saddled with student debt, many millennials have postponed financial milestones like home ownership. But not Brandon Davis.The 32-year-old police officer has already bought two homes. He owns his current 3-bedroom, 2-bath house, near Reno, Nevada, outright. He paid off the mortgage with the recent sale of his first place, which was fully paid for and had been rented out.Remaining debt-free is a key strategy for Davis, who plans to retire in 10 years, at 42. As a public employee, he can start collecting his pension at that young age. But his ability to retire early isn’t only about his choice of employment.

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