You all know very well that you have to prioritise your savings regardless of your income. However, most of the time, it is not as easy as it seems because of debt obligations.
As far as it is about small loans, you may be able to adjust your regular expenses to stay afloat, but this trick does not come in handy when you have big debt payments like your mortgage and 100% guaranteed car finance.
You have tied yourself to these debts for a couple of years, and as a result, you do not have much wiggle room to put money toward your retirement.
Well, you are completely aware of its repercussions. It can make your life complicated during retirement.
Managing big debt payments along with setting aside for retirement is very challenging. However, you can still manage both. This blog discusses some tips to do that.
Review your budget
Even if you strictly follow your budget, you should still review it to check your daily expenses. You must know how much money is going out to suss out how you can boost your savings.
Little adjustments to your expenses will undoubtedly help you save some more money, but that may not suffice. You will have to figure out ways to trim your budget.
For instance, if you have already taken out car finance and you are close to the end of the agreement, you can decide to pay off the rest payment in advance. Even if your lender charges a prepayment penalty, it will be worth it.
If you still have to go a long way, you should check in the contract if it can allow you to pay in advance without costing you a dime. You can also refinance your auto loan if you can get the debt at lower interest rates.
However, do not forget to compare the total cost of the refinance deal with the current one. Ensure that you do not borrow money for small funding because this will take a further toll on your budget.
Create an emergency fund
A credit card debt is largely responsible for throwing you in at the deep end. As you come up with a financial emergency, you immediately reach out to your credit card.
Without realising cash availability, you use it for a transaction and then end up mounting credit card bills. To solve this problem, you should build an emergency cushion, so you do not need to swipe your credit card every time.
Even though you are not able to set aside a significant amount of money due to large debt obligations, you should continue to stash away as little as possible.
An emergency cushion does not intend that you will never need to borrow money in case of financial emergencies.
Of course, when your savings fall short of cash, you will have to borrow money, but having an emergency cushion can help you save a lot of money in interest.
Try to live off little money
You will have to curb your desires until you have managed to pay off your debt. There are various circumstances when you feel like you should not mind spending, but this is where you slip up. Car purchase and mortgage are already very big expenses.
When you are under debt obligations, it may not be the right time to be prodigal. You should instead analyse the true nature of your expense. If you can decide to buy that thing, you should whether you have the cash to pay for it outright or not.
If you are serious about your retirement funds, you may have to live off a lean budget for some time, which means you will have to meet your essential expenses only, including debt payments and putting aside your retirement funds.
reactionary expenses, including purchases that you can manage without. As you find some more wiggle room, you can enjoy your life the way you want.
Make more money
Increasing your income can make it easier for you to contribute to your retirement funds. You can either look for a job with higher pay, or if you are satisfied with your current job, you should try to grab additional work through a part-time job or freelancing.
Apart from that, you should make money from money. It means you should try to start investing money. If you do not have any knowledge, you can consult an investment expert.
They can suggest to you some assets to invest in after analysing your investment goals and current financial situation. Make sure that you have a diversified investment portfolio so you can avoid the risk of market fluctuations.
It can be anxious to invest money at the outset, but as you start making it your stride, you will start enjoying it. Make sure that you transfer the return you earn from assets to the retirement fund. Do not forget to calculate your risk tolerance capacity. An investment expert can help you determine it.
Talk to your financial consultant
It is not surprising to be overwhelmed while managing debt obligations with your retirement savings. If so, you should talk to a financial consultant.
They can help you come up with a plan that works out for you. You will have to be honest with your financial situation and goals if you want to make your plan work out for you.
Getting expert advice can help you determine how you can manage your debt along with your retirement plans.
The final word
Contributing to retirement funds is actually very challenging when managing large debt payments like auto loan and mortgage.
However, it does not mean that you should compromise with your retirement savings because otherwise, you will have financial problems in the golden years of your life.
If it seems complicated to manage both goals, you should try to consult a financial counsellor who can help you develop an effective plan.