Wondering how you’ll ever be able to retire with your current retirement savings nest egg? Make a plan to retire debt free. When you retire with fewer expenses, you may find that retirement is more affordable – and feasible – than you think. Here are six simple steps you can take now in order to retire debt free. While some of these steps may seem hard, or even impossible, you can do it – one step at a time.
1. Keep your housing costs low.
Whether you opt to own your home or rent, Credit.com advises that you keep monthly housing expenses (which include the cost of rent/mortgage, plus insurance and taxes) to no more than 28% of your monthly income.
2. Consider shorter-term loans.
When your goal is to retire debt free, financing major purchases like a home or a car with a shorter term loan (like a 36-month car loan or a 15-year mortgage) can help you stay honest about what you can truly afford, while reducing how much you pay to borrow, and for how long.
3. Eliminate credit card debt as soon as possible.
According to Bankrate.com, paying off your credit card debt is one of the best investments you can make, especially when your goal is to retire debt free. As you decrease your credit card balances, you’ll have increased cash flow that you can use to aggressively pay off other debts – which may include your home mortgage
4. Never co-sign.
If your name is listed on any credit account or loan as an official co-signer, it’s legally considered your debt – even if you didn’t make the purchases required to create it. If you want to retire debt free, don’t put your name on any debt you don’t have complete ownership of.
5. Set tangible goals.
You may know you want to retire debt free. But how exactly will you get there? Form an action plan for how much you’ll need to save in order to slowly pay down your debts each month.
6. Resist lifestyle inflation.
As you become debt free, you’ll have more spendable income. Ironically, that can reduce the pressure to budget carefully and cause you to spend more freely than you did when you had less cash. Give purpose to your new budget, and stay on track.
About the Author
This article was written by Discover, a popular credit card service in America.