Americans are starting to feel more financially stretched as inflation remains elevated, housing costs have soared, and credit card debt recently surpassed $1 trillion.
As life has gotten more expensive, many Americans are looking to cut spending and pay down their debt. It's a wise strategy, but sometimes, making loan payments comes at the cost of putting money aside for retirement.
So, how can Americans save for their future while tackling loan payments? Here are a few ways to manage both saving for retirement and paying down your debts.
1. Set a savings goal
This one seems obvious, but creating a goal is one of the best ways to achieve what you want. Research from Dr. Gail Matthews shows that writing goals down daily makes people 42% more likely to achieve them.
Make your retirement savings goal realistic, especially if you still have loans to pay off. And don't be too worried if you come up short of your savings goals, either. The point is to move closer to your goals and have a plan to get there. You can always adapt your strategy later if needed.
2. Automate your retirement savings
Automating your retirement savings is one of the easiest ways to stay on track with retirement goals. Many experts call this concept “paying yourself first,” meaning that you pay money toward your future self before setting aside money for bills and loan payments. This can be as easy as transferring a small monthly amount from your checking account to a savings account or a brokerage account.
By paying yourself first, you'll continue to build your retirement savings each month and then put any remaining money toward your loan payments.
3. Consider a debt consolidation loan
If your retirement savings are more or less on track and you're having trouble coming up with enough cash to pay down your debt, then you may want to consider a debt consolidation loan.
For example, if you have multiple credit cards you're trying to pay off, getting a personal loan that consolidates all of that debt into one payment, potentially with a lower interest rate, may be a good choice.
You'll want to ensure that the offered interest rate, repayment terms, and monthly payment suit you before you sign up for a debt consolidation loan. One way to determine if this is the right move is to compare debt consolidation loans.
By consolidating your debt into a lower payment, you can better manage your personal finances and cover the cost of paying off debt and saving for retirement.
4. Take advantage of your 401(k) match
If your job has a 401(k) plan you can sign up for, there's a good chance it also has an employer match program. For example, some companies may match 50% or more of the contributions you make toward the plan, up to a certain percentage of your income.
Signing up for your company's 401(k) employer match program helps you achieve financial goals by taking some of the retirement savings burden off you. For example, if you save $200 per month in your 401(k) and your employer has a 50% match program, then it will add an additional $100 into your account each month.
Since your employer is helping you save that extra $100 per month, consider using the savings and put it toward your debt.
5. Consider opening a high-yield savings account
Many banks are competing for your business right now and offering high-yield savings accounts. While putting all your money into a savings account isn't the best way to make it grow over time, it can be a good place to keep extra cash before investing.
You can compare the best high-yield savings accounts to find the right one for you. Some banks even offer hundreds of dollars to open an account if you deposit a certain amount or sign up for automatic deposits.
You may be able to put some extra cash in your pocket through a sign-up bonus offer, which you can then put toward paying down your debt.
Remember that while tackling loan payments is a wise financial decision, it's also smart to balance it out by setting some money aside for your future.
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