Personal Debt Repayment Strategies To Accelerate Your Retirement Savings
Personal debt is a real burden that keeps many people in a constant financial struggle. But then, it is not a problem you have to be managing until the end of your life. With some of the proven debt repayment strategies discussed in this post, you might be able to get out of debt sooner than you thought possible.
Now that you are thinking about retirement savings, debt reduction, and complete elimination, you have to take it more seriously than you used to do.
According to the American Psychology Association, concerns about money are one of the leading causes of stress. Debt is just one of the most common money-related concerns. Unfortunately, when you have an oversized debt, it will negatively impact your physical and emotional well-being.
Types of Personal Debt
- Credit card debts
- Mortgage debt
- Auto loans
- Student loans
- Medical debt
- Good vs. bad debt
Why Accelerate Your Retirement Savings Plan?
You Don't Need To Rely On Social Security – Social security entitlement will not be enough for you during your retirement. Hence, you don't want to rely on it. Without enough retirement savings, living your ideal life during that inevitable time will be nearly impossible. Besides, you don't want to rely on support from your family members.
You Can Benefit From Tax-Deferred Retirement Savings Account – Some investments are purposely created for retirement savings. Based on the nature of these investments, you can start benefits from deferred tax payments that are rarely available with other types of investments. Besides the deferred tax benefits, you'll benefit from compound earnings that accrue to such investments.
It Takes Time To Save Enough Money – If you didn't start early enough, you need to start saving more than younger people. The reason is that it takes a long time to save enough money for retirement and potential investments. Unfortunately, if you don't have enough retirement savings, you may not be able to take advantage of retirement investment opportunities within your reach.
According to some of the leading financial advisors in the US, the most common statement among people starting to think about retirement savings is this 'I wish I had started earlier.
Debt Repayment Strategies Worth Exploring Today
Leverage Debt Consolidation
Debt consolidation is a form of debt refinancing that entails taking a new loan to pay down other types of debt. With a strategic debt consolidation plan, you might be able to find opportunities to negotiate lower interest rates on your existing debt. On the other hand, lower interest will leave you with more money to pay down even more debt in a faster way or start a retirement savings plan.
More than you may realize now; there is a possibility that you are qualified for some debt consolidation loans. However, consulting a certified financial advisor can help you uncover the best opportunities and put you on the right track to make the best decisions.
Start With The Most Expensive Debts
It is easy to ignore the little differences in interest rates among credit providers in the United States. But when the little differential amounts are calculated over time, you might be surprised to see what the lump sum will amount to. By giving extra attention to the most expensive debts, your overall debt burden will start going down faster. Depending on how consistent you are, eliminating the debts with the highest interest rates will give you more money to save for retirement or pay down other debts.
Explore Additional Opportunities To Increase Income
More than anything else, your disposable income will determine how much you are capable of saving for retirement. If you want to accelerate your retirement savings starting from today, one thing you can do is explore some additional income opportunities. Depending on your knowledge, skill set, available resources, and motivation, you might be able to create an alternative income within the next 30 - 90 days.
With more income coming from your additional activities, you'll increase the capacity to pay down your debts and save more for retirement. Think of what you can do with an extra $500 - $3,000 per month. See below for the best additional income opportunities in the USA.
- Become a handyman
- Start a dropshipping business
- Start blogging
- Use your skills for freelancing
- Create a print-on-demand store
- Become a delivery agent
- Create and sell information products
- Start Amazon FBA business
- Create and monetize a Youtube channel
- Create and sell crafts on Etsy
- Start trading cryptocurrency
- Buy and sell penny stocks
Pay More Than Required Minimum
For every type of personal debt, there is always a required minimum repayment amount. Most times, it is up to you to pay the exact minimum amount or go beyond that. Even though nothing will happen if you stick to the bare minimum, paying more than that is in your best interest. Instead of clearing all your debts in 12 months, for instance, paying more than the minimum will help you get out of debt in a shorter time.
The sooner you start leveraging some proven debt reduction strategies like paying more than the required minimum, the faster you can get out of debt. Consequently, getting out of debt as soon as possible will make you have more money to save for retirement.
Change Your Spending Habits
Have you ever stopped to ask yourself this question – why did I get into debt in the first place? In some cases, you may find out that your inability to start saving for retirement has something to do with long-term bad spending habits.
As most experienced financial advisors will tell you, earning money is not a problem for most people. Saving and multiplying the money is where the problem exists. If you can identify and change some of your bad spending habits, you'll have more money to start saving for retirement.
According to Fool.com, around 70% of Americans admitted they have bad spending habits. Some of the most common bad spending habits among Americans include the following –
- Impulse buying
- Not using a budget
- Unused subscription plans
- Paying late fees
- Spending out of boredom
- Stacking up credit card debt
Final Thoughts
Saving for retirement is something you should not postpone to a future date. Start your plan today to determine your quality of life in retirement. Unfortunately, you can hardly save enough money for retirement investments when struggling with sizable debts. Try to leverage some of the proven debt elimination strategies in this post to get out of debt and start saving for retirement investments as soon as possible.