Planning Your Retirement: Save Money and Eliminate Debt

Gone are the days of unrestrained spending supported by easy credit and excessive borrowing. Being frugal is in, spendthrift ways are out. The American middle class is getting the message that they have to spend less and save more money. To have any chance of enjoying a secure financial retirement, people must make saving money their top budget priority. No longer can we count on rising house prices and a soaring stock market to support uncurbed spending and unnecessary debt.

And retirees can no longer count on employer-based retirement benefits; they must have saved and invested enough money to provide their own monthly income stream. Social security payments will not provide nearly enough money to meet monthly expenses for many households. And no matter what happens with so called health care reform, health care insurance will remain expensive; in some cases, these premiums, alone, will be the highest monthly household budget item for many households.

So how can people cope? First save, save and save more money. Make savings your first priority. Curb spending and save every nickel and dollar possible. Save first and spend later. Second, minimize debt, particularly if you are nearing retirement. Mortgage and car payments are necessary for most people, but most other consumer goods can be saved for; save money to pay for goods in full instead of buying them on credit. Don't let credit card debt mount up. Just because you can afford the minimum monthly payment on an unpaid balance is not a good reason to accumulate debt.

Make a plan to eliminate all debt before you retire, particularly if you're 50 or older. Making debt payments on a fixed retirement income is not a good plan. Debt is best paid off when you are working and your income is increasing. Then over time your debt payments become an ever decreasing percentage of your income. Paying off debt on a fixed income can become difficult because over time your regular monthly costs for food, utilities, health insurance, clothes are likely to increase. Consequently, you may have to choose between making debt payments or paying some other bills.

Start Saving Now

buyupside.com offers many easy-to-use calculators that will help you develop a savings plan.

See Control Your Spending and Increase Your Savings for more articles about saving money.

Our companion site Save Your Nickels includes many articles about saving money and watching it grow. Use our saving and investing calculators to help plan your saving and investment program.

Read Eat Your Spinach, a book from buyupside.com that shows you how to spend less and save more.


Posted June 26, 2009.

Home | Making Money | Portfolios | Dividends | Retirement | Articles | Charts | Stocks | Tables