There comes a point in our lives when saving money is our priority. Especially if we see ourselves spending on a lot of stuff we don’t actually need. And when it comes to big financial goals, saving for retirement, or paying off debt, it isn’t always clear-cut.
If you have some extra funds, how do you prioritize?
The answer to this question should be easy because it’s all about finding a balance that’s right for you.
Continue reading our article to learn how you can cut your budget to help you pay off retirement debt.
1. Save in an emergency fund so you can avoid unexpected debt
It may be difficult for you to cover some unexpected expenses, such as car repairs, which can be very expensive, especially if you need them right away. In order to avoid situations like this one, make it a goal to build an emergency savings fund. Take it easy and try to save each month as much as possible.
Regarding your payments from that month, add them every time you can.
Make sure you will keep them somewhere in cash, preferably instead of a card. You know, it’s better to have them at home. Plus, you won’t pay extra tax to the bank to keep them for you.
2. Instead of eating out, cook at home
Going out for dinner can be an expensive affair indeed. And it’s a big budget downfall for many households. Nobody says that you should never go out for a meal, but try to stick to cooking at home instead of ordering and going out to have some spaghetti. If you used to spend most of your Friday evenings outside, you can cut that down to one or two meals per month. This way, you will put cash aside much faster.
Someone said that they save almost $500 per month based on the average household budget. This way, you will pay the debts you have and you can save more as well!
Even if you’re paying off debt with a bit of planning and taking advantage of available retirement savings tools, you can also start saving for your retirement!
3. Reducing necessary premiums
Let’s face it, we have so many bills to pay every month, but that doesn’t mean you cannot save any money. You may notice that even auto insurance has become expensive. But you can always reduce the cost by looking for another offer.
You may think that this won’t destroy your budget, but adding up the bills can.
Cut a $200 cell phone bill in half, and that will save you $100 each month. The same with car insurance or any other cost that can be actually reduced.
Don’t cut them entirely because, for sure, you need them.
4. Start paying off some of your debt
Sometimes you may feel overwhelmed because of how much money you have to pay each month. And this happens to all of us at some point. All you have to do is start calculating your budget in order to know how much you can save from it. You should pay off your credit card bills first because you are most likely paying the highest interest rates on your credit cards.
In this case, you can try the “debt-snowball method.” Which works pretty well for most of the people who have tried it.
Pay off the card with the lowest balance first, while only paying the minimum on the others.
Pay your mortgage off faster and, last but not least, use some of your savings to pay off debts. Just remember, the more you can pay off now, the less you will have to stress about in the future.
TIP: Remember, having some little savings can help you avoid accumulating new debt if an unexpected expense pops up!
5. Accelerate retirement savings
Being free of debt right away is not really possible. But that doesn’t mean you can’t save more money for retirement. It just depends on your goals and priorities. It’s all about balance, as we previously said. With baby steps, everything is possible.
Stop comparing how much you need to save for your retirement to how much you are able to save.
Just put aside some money (whatever you can) each month to get to your goals. You can always increase your retirement savings each year until you reach the level you want to by the end of the year.
Make sure you will have a secure retirement!
6. Create a budget
This means that you will take an honest look at your finances. No need to worry about it! Start with how much money you “enter” into your house monthly. Take aside all your expenses (like transportation, food, rent, mortgage, etc.) and see what’s left of your income. Then you can actually figure out how much you can afford to set aside at this moment.
Maybe you can actually afford $5 or maybe $10 a week. And that’s amazing for the start!
You can also see what you can remove from the budget. Look for ways to use less power in order to have a lighter bill to pay for the electricity. Maybe you can go to sleep earlier and wake up for some jogging!
You should always think about some unexpected emergency that requires you to dig into your savings. Just make sure you reorganize your budget and get back on track whenever you are ready!
7. Talk to an advisor
Do you need help regarding this matter? Everything starts with great advice. Especially from someone who is an expert. They will work with you to understand your goals and what you want to achieve. It’s always helpful to know where you stand financially, and if you are overwhelmed, it’s OK to ask for help.
After that, you will set up your retirement investments and then let them grow until it’s time to claim them. And don’t forget that at least once a year you talk to your advisor and review your investments to see how they go.
What do you think about this? Are you ready for retirement?
8. Track your spending
Why is it recommended to do that? Because the most common reason budgets fail is that we don’t keep track of everything we spend. When you are trying to do something and stick to a hard plan, you can easily get discouraged. But tracking the money you spend will help you see the big picture.
How much have you spent at the supermarket? How many other bills do you have to pay this week? How much can you put aside? You can easily track them in a physical notebook if you keep a pen or pencil nearby.
If you are good with technology, then you will love all the apps that will help you keep track of your spending. Maybe you want to see them in front of you every time you go into the kitchen. Then a checkbook or a calendar stuck to your wall might be the best solution. Circle the dates that you know that it’s the deadline for a certain bill. That will help you keep a clear vision right in front of your eyes.
If you usually spend cash, then try to put your spending money for the day or week in an envelope. Whenever you take the cash out, you can put the receipt in the envelope. Remember to divide your expenses into categories if you are trying to limit them.
Did you know that more than 41% of Americans say that they don’t know when and if they’ll pay off their debt? Do whatever it takes to save as much as possible. Call your credit card issuers and initiate a discussion about how you can lower your rate or have the fees waived.
Remember that getting a head start on saving will help you achieve your long-term goals.
Carrying debt over a long period of time can be stressful, plus it’s not ideal. At the same time, you can’t stop saving money. So what could you do? Find a balance that suits you and just stick to it.
To find more information about taxes in retirement here’s another article you may like Taxes in Retirement: 7 Questions Retirees Need To Ask Themselves.