Pay off Debt or Save for Retirement?

May 7, 2013

By: Barb Miller, Bankruptcy Specialist at LSS Financial Counseling

Wow … what a loaded question! We always hear how crucial it is to get rid of toxic debt, especially credit cards with double digit interest rates. Therefore, people generally assume that paying off debt rather than investing for retirement is the correct answer. In my opinion, this is not really an either/or proposition. The best approach? Do both!

One of my favorite financial gurus is Liz Weston, a regular blogger for the personal finance section of MSN’s Money website. She often tackles difficult topics, and makes them easy to understand.

Where you need to be:

Before getting into why it is important to both save for retirement and pay down debt, we have to start from a common point. To be able to move forward financially, it is essential that you are 1) using a budget to control your spending, and 2) have extra income for both debt repayment and your future retirement.

If you are spending more than you earn each month (or have no idea how much you spend), it is time to deal with the basics. This means learning to live within your means. The brutal truth is if you don’t control your spending, you will likely continue to abuse credit, and never have money tucked away for emergencies or retirement.

Saving for retirement:

Westin points out that retirement can be expensive and lengthy, especially since people are living longer these days. If your employer offers a retirement plan, and you don’t participate, you lose out in several ways.

Paying down debt:

 

About LSS Financial Counseling

At LSS Financial Counseling, we empower people to take control of their debt with tangible steps and personal guidance that are the key to confidence and success. We’re here to help you with your finances, not take over and ultimately show you that you’ve got what it takes to Conquer Your Debt.