Is there a shadow of debt casting a dark cloud over your finances and retirement plans? Read our tips on how to brighten your future.
Financial debt is a fact of life. How you manage your debt and spending habits today is what will define your future, including your retirement planning objectives.
Many people find it incredibly difficult to save money and plan for retirement. That’s not uncommon. Being mired in debt only complicates matters. How you define your retirement and financial future is dependent upon the decisions you make today. In many ways, the difference between managing debt effectively and saving money comes down to being frugal and happy with the quality of living you have today. By doing so, you can secure the quality of living you want to have in the future.
To put it another way, if you’re a spendthrift who relies heavily on credit cards and a line of credit to fund your purchases, you’re essentially mortgaging your future. That’s one of the major problems with being deep in credit card or line of credit debt.
Similar to managing an investment portfolio, you need a thoughtful, flexible strategy for managing your debt and consumption habits. No doubt you’ve heard people talk about diversifying or rebalancing their investment portfolios; look at debt in the same way. Debt, like investments, is also a portfolio that you can manage more efficiently. Unlike investments where you’re seeking the highest possible returns, for debt you want to manage it effectively so you achieve the lowest cost of borrowing.
Good Debt, Bad Debt
Is there such a thing as “good versus bad debt”? Yes. Good debt is an investment in something that will generate returns or long-term income such as property. Bad debt is credit card or consumer spending debt where you don’t have anything to show for the spending other than maybe some good life experiences.
Basic economics theory suggests you can do one of three things to effectively reduce your debt: you can make more money, spend less money, or a combination of the two.
Five Ways to Manage Your Debt Effectively
Are you worried about the amount of debt you have? That’s a good sign. It means you’re ready to do something about it.
Getting out and staying out of debt should be every individual’s goal, but how can you do that and still have the things in life you want while saving for retirement? Consider these ideas to help you tackle your debt:
Everyone faces a unique situation when it comes to debt, but understand that you’re not alone in that struggle, and there’s no reason to feel ashamed about being in debt. Above all, know you always have options to help you seize control of your debt portfolio, and in turn, make retirement planning a reality.
Do you have questions about or are seeking assistance on how to reduce your debt? Talk to one of our professional, certified financial and investment advisors. We have the experience and expertise to help. Call us toll-free at 1-800-595-2150.
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J.R. Genua is the founder of Centre Square Solutions.