Two major concerns many Americans face today are credit card debt and retirement savings. Saving for retirement seems like an impossibility when you have sizable credit card debt, simply because the interest added each month makes it a difficult task to reduce or eliminate it. But there is no reason to sacrifice a retirement savings plan simply because of credit card debt — it is possible to both save for retirement and pay off your debts, so long as you take the time to do a little planning and budgeting.
Examine Your Debt Thoroughly
The first step to eliminating your debt is understanding where it comes from. Simply knowing that you need to pay X amount of dollars each month for credit card bills and other expenses isn’t enough. You need to examine what you spend your disposable income on to determine what isn’t necessary and can be eliminated. For example:
- Do you need that extra cable box and all those premium channels?
- Do you need those magazine or newspaper subscriptions?
- Are you eating out too often?
- Can you shop smarter for household supplies and food?
After taking the time to examine how you spend your money, you should be able to find ways to save more each month.
Determine Amounts for Debt Payoffs and Retirement Savings
Once you have a clear picture of how much extra cash you have every month, you can allocate more to paying off your credit card debt while also allocating some to a retirement savings plan. Don’t feel bad if it isn’t a large amount at first — every little bit adds up over time. And as your debt dwindles, you’ll be able to add more to your retirement savings. A long-term plan such as a 401(k) where you work or an IRA can yield a large amount of interest over time.
Other Ways to Reduce Your Debt Quicker
To get additional help paying off your debt, consider asking your credit card issuer for a lower interest rate. You might also try consolidating many credit card debts into one that has a lower interest rate, or even a 0 percent interest rate for a significant period of time.
Remember, the key to achieving debt reduction and retirement savings is to be consistent. Stick to your payments and stick to your budget. Try not to waver from your budget because it can be easy to fall into old habits. But if you don’t, you’ll find your financial future to be a more reliable one.