Debt Free Retirement – Start Early

The earlier in life that you start and implement a plan for a debt free retirement, the better – and the sooner that you’ll get there. Debt is pretty much unavoidable while living through todays modern world. However, the sooner you begin avoiding debt, and the sooner that you shed any debt you must incur, the easier and better for your retirement years. If you’re young, this may seem an eternity away. But trust me, it’s not. Life happens much faster than you think. When you get there and look in the rear view mirror, you’ll say ‘wow’ that was fast…

Today’s economy makes it especially difficult. Especially for those just starting out on their own. The big paycheck isn’t there yet. Rent is expensive. Heck, everything is expensive. Even for the middle-aged who are well into their careers. How in the world can you even think about getting through ‘life’ without debt on your shoulders? It seems nearly impossible. And maybe it is, to an extent. But you can control it.

Living debt free (or getting there for retirement) is a simple concept. Spend less than you earn, and accrue no debts that you can avoid. If you must take on a loan, be smart about it and minimize the burden that you take on.

Pay as you go (from money on hand). Sounds simple, right? So, why are so many people unable to do it and rack up credit card debt? We’ve heard it before… “live within our means,” “develop budgets”. But in the end, most people inevitably find themselves in the hole, trying to dig out. Or giving up on ‘digging out’ altogether. We’ve been trained as a society that debt is okay. The thing is, it’s really not so good – when it comes to personal finances.

Permanent lifestyle changes to become debt free for retirement

To stand a chance at becoming debt free, and a debt free retirement – It may require a lifestyle change. To spend substantially less money than your ‘take home’ pay / income. And, to be committed to live that way. It means living below your means, and seeing it through long enough to get out of the hole, and not going back to your old habits. In order to stay debt free, you need to maintain a debt free lifestyle. Plan for the long-term and make permanent lifestyle changes if you need to. Your retirement years will thank you.

Your reward during retirement

You don’t want debt during your retirement years. Some may say that it’s okay because they have a nice ‘nest egg’ in a 401K or IRA whereby they can easily withdraw equivalent amounts to pay loans (which may be more tax beneficial than withdrawing a lump sum to pay for ‘xyz’ upfront, even during retirement years). However while that may be true for some people, I’m talking about developing a mindset (during your working years) of not counting on that nest egg to enable debt in your retirement years. If you end up with a big nest egg, that’s great! The thing is, that nest egg will be even greater if you don’t have to use it to pay off your acquired debt.

Budget, be honest about your expenses

So, how does the working person plan for a future that involves minimizing debt? “Debt free” is a misnomer, as few people can afford to pay cash for a home or car these days! But you can be smarter about it. Develop a realistic budget. Budget is not a bad word. Take into account your current expenses, your long-term plan, and the development of an emergency fund too. Be honest about your expenses and goals when you make your budget – this needs to be a plan you can follow for years, not for weeks or months. You need to think of a budget as a life plan to reach your goal of a debt free retirement. And don’t buy that McMansion or fancy new car… Your retirement years will thank you later.

Discipline, follow it through for your reward to a debt free retirement

Make it a lifestyle. Living and spending below your means. Not ‘at your means’, but below your means. When you live this way, you will build up cash. Use it to pay off debt. Build a reserve. Your retirement years will thank you, especially if debt free. People might not fail because they had a bad plan; they may fail because they lost sight of the plan, and didn’t have the motivation and discipline to follow it through.

Retrain your thinking and spending

Yes, debt free living is a simple concept, and one not easily executed. Many have spent their entire lives learning to live in debt. The system nearly forces it upon everyone. It needs us in debt. Remember, it will take time and commitment to retrain your spending habits. Refrain from frivolous spending. Don’t lose sight of your future. You will face setbacks, make mistakes, and may wonder “Why did I do this?”. Trust me, your retirement years will thank you.

I know that I’ve written about this simple concept quite a few times here on the blog over the years. Well today I felt like doing it again. Given todays very high inflation and high costs of everything, I am so glad that I’m living a debt free retirement. Almost every time I walk out of the grocery store having paid so much more money than before (as just one example of todays high costs), I can’t help but realize how difficult it must be for many who are retired on fixed incomes with not much money. And if they also have debt, well, it’s that much worse. So do yourself a favor if you’re still in your working career years… Do your best to setup your later years to be debt free. The sooner you get there, the better!

Some of the biggest / impactful money decisions that you might make during your working years may include some of the following:

• The long term financial impact of buying a house and paying that mortgage. Oh my goodness. This is the biggest decision. How much, or how little to spend… It is SO EASY to be tempted to buy the ‘nicer’ or bigger house – because you can ‘afford it’, and you really want it. But let me tell you, that extra money, the bigger payment, the more interest you pay to the bank for years and years and years – it’s going to set you back further than you may realize over the long run. It is a big deal! And it may also be a big mistake to assume or plan on having an abundance of home equity value years down the road – to justify the extra purchase expense.
• The same principle goes with buying a vehicle. You may be able to afford a payment that costs an extra hundred or more a month for the nicer car. But that money will stay in your pocket if you don’t…

[ Read: How To Reduce Your Expenses And Debt ]