For many people just starting out in their careers, planning for retirement is somewhat of an abstract concept because it’s just too far away. But the fact is that it’s easier to make money when you’re younger.
Most of us start accruing debt in college with student loans. Next comes buying your first house and taking on a mortgage. Even more debt. Add credit cards, car loans, and financing college for you children. As you get older, the likelihood that you’re going to have to take on more debt only increases with increased responsibilities and changing spending habits.
However, if you’re thinking about retiring when you hit your 60’s, you need to start saving and doing whatever you can to minimize your debt. Make a plan early into your career as to how to go about paying off debt so you can achieve financial security before you retire. And, that plan should include being debt free when you’re 40 years old.
So, if you find yourself debt-free, what can you continue to do to remain financially independent? The first thing you need to consider are your spending habits. Just because you’ve paid off your debts doesn’t mean you have to indulge yourself and go out on a spending spree! Make some changes to your lifestyle so that your spending is more purposeful vs. frivolous.
What you should do next
Becoming debt free means that you’ll be saving more towards retirement. Maintain a monthly budget like you did when you were paying off your debt, but now, instead of sending off those monthly payments to a credit card company or mortgage lender, you’re going to put it into savings.
Next, you’re going to want to put those saved dollars to work for you. Do you want to put it into a retirement account or matching 401(k) plan through your employer? Keep some of it in a savings account in case of an emergency? Do you want to use some of it as a down payment on a house or investment property?
At Blankinship and Foster, a fee-only financial advisor and fiduciary serving Southern California, we provide in depth proactive financial planning as part of our wealth management services. We understand that each person’s situation is unique, therefore, we start with the topics that are most important and relevant to you as we guide you through retirement and income planning, employer and executive benefits, tax planning, and much more.
A customized plan for your family
If you’re debt free, congratulations! Now it’s time to consider financial planning in you 40’s so that you’ll be more financially secure when you retire. The financial planning you do in your 40’s can make for a smooth transition into retirement, providing you with the opportunity to do all the things you want when you retire, as well as providing for your family’s security.
Contact us to learn more about how our proven process brings clarity, confidence, and direction to your finances.