I have said this line again and again at Halcomb Singler, LLP, while meeting with people who are deep in debt. “You can’t take a loan for your retirement.” Ok….most of the time unless you have a rich aunt Bertha who will float you through retirement. But you get my point….I see far too many people spending 10 plus years attempting to pay off their debt and failing to contribute anything to retirement in an attempt to do so. This, in my opinion, is an epic fail.
We have all heard that the earlier you start saving for retirement the more your money grows. So why are so many Americans spending prime savings years taking all of their money to attempt to get out of debt while saving nothing??
Understand that I am not saying it is a bad idea to attempt to pay off your debt. What I am saying is that it is a bad idea to use every extra cent to pay off your debt, especially if it going to take a really long time. It is much better to contribute to your retirement and build up an emergency fund while paying down your debt at a slower pace. Sure, you are in debt longer, but you are also giving your retirement investment more time to grow.
For example, if you have $600.00 left each month after paying your living expenses to go toward debt I would recommend that if you don’t have an emergency fund that you set aside $250.00 per month for your emergency fund until you have $1,000.00 saved. After that point decrease this to $150.00 per month. Take the remaining amount and contribute to your work retirement up to the amount of the match. If you don’t have a 401k/IRA through work then open a Roth IRA and contribute $200.00 per month to the ROTH. Use the remaining funds to go toward debt payment.
Get a second job if you can so that you can pay down your debt faster, but don’t rob your elderly, possibly ill self of money you will need later in life. If paying off your debt simply isn’t feasible and you are starting to get a lot of telephone calls or worse have received a lawsuit on an outstanding debt seek legal advise. It may or may not be in your best interest to think about Chapter 7 or Chapter 13 bankruptcy. Only an attorney that has sat down with you to review your finances will be able to make that recommendation. But sometimes it is just a better decision from a math perspective to hit the financial reset button by filing bankruptcy. This decision, in the appropriate circumstances can often free up some of your income to go toward retirement savings instead of debt.
If you are a person who hasn’t contributed to retirement in 5 years because you have been paying off debt and you are in no better financial place than you were 5 years ago something is not working. It may be that you just need to start making retirement contributions and cut back on eating out or get a less expensive vehicle to make it work. But if you have already cut your budget to the bone and are not making any headway it doesn’t hurt to speak to a bankruptcy attorney to have your situation evaluated.
If you would like to set up an appointment at Halcomb Singler, LLP, give us a call at 317-575-8222 or click here. A bankruptcy/debt settlement attorney will spend up to an hour meeting with you to review your financial situation. There is no fee for the case evaluation. If bankruptcy is the recommended course of action you will be quoted a flat feee for representation in a bankruptcy proceeding and payment plans are available.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.