FLM2017 How to Pay Down Debt Now and Prepare for RetirementNov 02, 2017
Are high debt and living expenses making it impossible to save for retirement? Economic Professor Jason Childs from the University of Regina admits that recent interest rate increases might tip some families over the edge who are unable to cover their debt. Minimum payments will increase with higher rates and debt will take longer to pay off. Saskatchewan consumer debt is the second highest in Canada, and sits at $24,462 per person. For Gen-Xers, competing financial obligations and high debt are cause for concern because it often means they are not able to prepare for retirement.
How to make retirement a priority while paying off debt
Since November is Financial Literacy Month, it’s a perfect time to get your financial goals front and center and focus on what’s most important. If debt management and retirement savings are your goals, here are some tips to accomplish both.
- Lean into your budget
A budget is essential to your financial success. Without it, you can’t predict upcoming expenses or plan ahead for your future. So, ruthlessly go over your budget to see where you can cut costs, even temporarily. Find compromises so you don’t feel too restricted. Use this life-pie diagram as a reference point.
- Deal with existing debt
Find debt relief by going over your debt options with a debt professional such as a Licensed Insolvency Trustee (LIT). You might be able to consolidate your debt balances to free up cash, or for unmanageable debt. A consumer proposal may also be a good option depending on your situation. Either way, freeing up cash through debt management will allow you more room to grow a retirement fund. Compare your debt options here.
- Set financial goals for yourself
Paying down debt is a goal that requires planning and dedication. Set SMART financial goals that keep you on track and allow you to see your progress. For saving, financial blogger Rubina Ahmed-Haq recommends building an emergency savings fund and putting away 15 per cent of your take home pay until you have 3 months living costs in reserves. From there, you can start adding more to your retirement fund. Learn how much you’ll need to retire and plot the course to make it happen. Use this calculator for reference.