Early Retirement Blog

Get Out of Debt and Retire Early!

Paying off your debt is one of the best investments you can make. Every extra dollar you use to pay off a 13% credit card debt is the equivalent of earning a guanteed return of 13%   Paying off your debt is one way to earn high returns in a recession.

For many people, getting out of debt by going green and reducing your spending, is the first step in creating your Green Retirement.   The amount you save by reducing your spending is first used to pay off your debt, and once you are debt free, to boost your retirement savings.   Here is an example:

Say you have $10,000 of credit card debt with an interest rate of 13%.   Every month, you are paying $108 in minimum monthly interest payments, that is $108 that could be going to your retirement savings.

If you go green and get rid of your mini-storage unit, a $150 per month expense, get rid of your bottled water and take-out coffee habit, a $100 monthly expense, and reduce your other expenses by another $150 per month, you will have $400 per month in savings to payoff your debt,  enabling you to be debt free in 2.5 years.

Then after your debt is paid off, invest the $400 per month, and after 20 years you could have nearly $275,000 in additional retirement savings.

But first, before you get out of debt and begin saving for retirement, make sure you have an emergency savings fund, equal to six months of living expenses squirreled away in a savings or money market account.

If you are so hopelessly in debt, that even if you go green and cut your expenses, it will take you more than 5 years to pay off your debt, then you may want to consider filing for bankruptcy and starting over.   You can find out how long it will take you to get out of debt by using the CNN Money Debt Calculator.

Going green, reducing your consumption, not only helps the planet, it helps you get out of debt and  retire early.

Also Read:

Why You Should Not Retire in Debt