A personal finance retirement plan is necessary, but in order to realize your goal, you must take steps now to first get out of debt completely. One thing you may have forgotten about while creating your budget is to have a long-term retirement plan. It’s easy to get caught up in the present concerns and forget about the future.
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"A mortgage casts a shadow on the sunniest field."
- Robert Green Ingersoll |
In one way, though, staying focused on the present may be appropriate. Assuming you’re still a couple decades off from retirement, it’s more important now to concentrate on paying off all the debts you have. Only then can you seriously begin to start saving for retirement. However, the longer you wait, the more you rack up interest charges and other fees, in addition to new debt. So when it comes to personal finance retirement planning, be sure to being now to eliminate debt so your savings will be adequate down the road. You’ve probably already seen our strategy for becoming debt-free in other articles, but here’s a basic recap. List all your outstanding debts from smallest to largest. Take the smallest one and aggressively pay it off; paying everything you can each month until it’s gone, while making just the minimum payments on the others. Once it’s paid off, move on to the next-smallest debt, attacking it until it gone, and so forth. During this period, your personal finance retirement plans are not of major concern, because by paying off debt, you all setting yourself up to save more later on. So just continue to take things one step at a time. Now, once you’ve paid off your consumer debts (you can leave the mortgage alone for now), it’s time to start saving some money for retirement. Having your credit cards and other debts out of the way should free up a lot of money every month. Don’t go hog-wild and start spending it! If you do, you’ll soon be overspending, getting back into debt, and you’ll be right back where you started. (We Americans have a natural tendency to live beyond our means, no matter how lofty our means are!) By all means, splurge on occasion and enjoy yourself, but plan for those little celebration ahead of time in order to avoid overspending. After all, one of the reasons you got out of debt, so that you could enjoy your money, right. But be sure to save an adequate amount of money also. One key requirement for a good personal finance retirement plan is to open a sound mutual fund account and put 10 percent of your monthly income into it, more if you can. If your employer offers a 401k, contribute there first. Twenty-five percent would not be unreasonable; many Americans must pay that much every month on their credit card bills alone, and since you don’t have anymore credit card bills, the money might be readily available. Once you’ve accumulated enough money in your retirement savings account, you should be able to live off of the interest it earns, without ever touching the principal balance. This is what’s called being financially independent! The point is to pay off your consumer debt first, then start saving for retirement. You can use the same principles that helped you get out of debt to help you build a nice retirement fund. Now you are in control!
"Always bear in mind that your own resolution to succeed
is more important than any one thing.”
- Abraham Lincoln |
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Debt is NOT your friend. It's not a wonderful "tool" for building wealth. That's a myth.
