Planning for retirement essentially requires you to approach your finances from both directions: How will you set up dependable retirement income, and how will you spend it so that you stay within a reasonable budget?

To address that second point, entering retirement free of debt, or with as little debt as possible, is one of the primary ways to keep your budget under control. So, for those of you in your forties and fifties, reducing debts well before retirement is nearly as important as setting up retirement income.

First, assess your spending each month. Take a close look at the interest rates you pay toward revolving debts. Reining in spending is key at this time. Then, investigate methods to consolidate debt so that you free up money spent on high-interest payments. Refinancing your mortgage might be another worthwhile consideration at this time, because rates are all-time lows. Saving on your monthly payments could free up a significant amount of money to dedicate to other important priorities.

Next, switch your mindset. Your first priority, with each pay period, should be paying yourself. Contrary to common belief, you should not pay off debts before saving for retirement. If you do this, you will cost yourself many years of compounding interest in your retirement account, and it is difficult (impossible, really) to make up for lost time.

Divert a portion of each paycheck to a retirement account, so that you aren’t even tempted to spend the money. Design your budget around what is left over.

Speaking of what is left over, saving should once again make its way into your monthly budget. Stash a bit of cash in a savings account each period, so that you have easy access to money in an emergency. With a rainy day fund in place, you won’t have to rely upon high-interest credit cards to cover emergencies.

And finally, start training yourself to think in the long term. It is difficult for many of us to picture the distant future, but the future is inevitable for all of us. Make an appointment with us to discuss your long-term financial plan, and we will put together a strategy to address debt, spending, and saving for the future.