It is not uncommon to fear falling behind! Most people struggle to manage both their debt and retirement, and if you're reading this, you might be one of them.
How much should I be putting towards my retirement?
Should I pull from my retirement to cover an unexpected expense?
How should I invest to best prepare for the future?
I have found that speaking in general terms is the best way to answer these questions, as each of my clients has a unique situation that I cater to. However, a more detailed plan and strategy are available for those that work with me!
Firstly, you need to set up an emergency account if you do not already have one. An emergency account is set aside to cover... you guessed it, emergencies. Life is unpredictable, and I would never start investing long-term without one set up. Financial anxiety occurs when we have an unexpected cost and no cash to pay for it. This expense gets handled with the accumulation. So, here is the principle – Don’t invest for the long-term while the short-term is not protected. Savings should always come first.
What about Savings vs. Debt Elimination?
Assuming you have some type of emergency account established, it would be in your best interest to focus on debt elimination before saving for retirement UNLESS your company offers an employer match. For example, if your company matches the first 3% of your contribution, I would focus on putting enough back into your 401K plan to satisfy the match and THEN pivot towards eliminating your debt with what is remaining.
Advice is always more beneficial when tailored to you, as there are many ways to go about this scenario. However, these are great starting places and have the potential to help you get out of debt once and for all.
Bob Brooks is the host of the Prudent Money Radio Show, heard every weekday from 3:00 PM - 3:30 PM on FM Radio 91.3 KDKR
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