Green Retirement

Are you one of the millions of Americans who are deeply in debt?  Did you know that your debt caused a tremendous amount of environmental damage?  Every time you went shopping, and used your credit card, you were killing the planet.  To produce the product that you could not afford, required the increased consumption, of an unnecessary amount of natural resources.  Rain forests were chopped down, species went extinct, the planet’s air and water became more toxic.

But, I’m not here to make you feel guilty, I want to make you feel good. To get rid of your debt requires that you reduce your consumption.  Getting out of debt requires that you stop using your financial resources to consume earth’s natural resources.  Getting rid of your debt saves the planet.  And, getting rid of your debt, helps you retire early.

Paying off your debt is one of the best investments you can make.  Every extra dollar you use to pay off a 19% credit card debt is the equivalent of earning 19% in the stock market.  Paying off your debt is one way to earn high returns in a recession. Everyone should be debt free when they retire. Paying interest on debt in retirement reduces your retirement income, and over time, could put your retirement in danger.

For many people, getting out of debt by going green, is the first step in creating your Green Retirement.  The amount you save by reducing your consumption will first be used to pay off your debt, and once you are debt free, will be used to build up 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 get rid of your mini-storage unit, where you keep a lot of the stuff you bought, a $150 per month expense, get rid of your bottled water and take-out coffee habit, a $100 monthly expense, and reduce your shopping habit by another $150 per month, use the $400 per month in savings to payoff your debt, you could be debt free in 2.5 years.

Then after you are finished paying off your debt, invest the $400 per month, and after 20 years you could have nearly $275,000 in additional retirement savings.   But first, before you green your debt, make sure you have an emergency savings fund and that you eliminate the need for bankruptcy.  You should pay only the minimums on your debt, and put your savings into a bank account, until you have six months of living expenses squirreled away.

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.  Losing 5 years of retirement investing considerably reduces the amount of savings you can accumulate.  If you invest the $400 in savings from going green, for 15 years instead of 20, you will have $150,000 in retirement savings instead of $275,000.  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.