People see retirement as their chance to be free from deadlines and responsibilities. This is the perfect time to enjoy one’s life and start blissful hobbies.
Unfortunately, many Australians are still retiring without breaking free from the ultimate responsibility—debt. Recently, debt has even risen among adult Australians.
In this article, you will learn about strategies toward achieving a debt-free retirement.
The Benefits of Being Debt-Free
Eliminating your debt before retirement will help you both financially and psychologically.
1. Enhanced Wellbeing
According to various studies, being in debt puts you in significant psychological distress. This is why becoming debt-free will greatly help you live a happier life during your retirement years.
To avoid feeling worried every time you need to pay your monthly mortgage and car maintenance, you may want to pre-empt these issues as early as now. You may have to make some sacrifices to pay debts off, but you will definitely reap the benefits later on.
2. Reduced Stress for Your Family
Entering your retirement years with a lot of debt can lead to severe financial crises. And experiencing these can cause stress on your children and other members of the family. In addition to maintaining your overall well being, your family may also need to spend a fortune on availing of aged care. Protect yourself and your family from this kind of situation by settling your debt while you are still working and earning.
How to Pay Off Debt before Retiring
1. Adopt a Higher-Risk Investment Strategy
Considering a higher-risk and higher-return investment strategy will benefit you, especially if you still have decades before your retirement. Increasing your risks will also increase your gains and help you enter retirement years with additional money.
2. Consider Debt Recycling
You may want to talk to your wealth adviser about the potential of debt recycling. This is the process of borrowing against your equity and investing in these borrowings. Debt recycling can help you pay off home loans a lot quicker while reducing your non-deductible debt for tax purposes.
3. Create a Plan
Every endeavour should start with a clear plan. If you have doubts and uncertainties, we recommend consulting a wealth adviser to guide you.
The first thing you need to do is to account for all the debts you have. These include business loans, car loans, credit card debt, mortgages, and student debt. List down all of these, including the interest rate of each. This will help you decide the best strategies for your debts.
4. Pay Off High-Interest Loans First
Take a close look at all your debts and focus on the ones with the highest interest rates first. Then, slowly pay off your loans from the highest to lowest interest. This is an efficient and practical approach to paying debts since your efforts are likely to snowball every time you check off a loan.
5. Pay More than the Minimum
It always helps to pay more than just the minimum amount of your monthly mortgage and other loans. By doing this, you can take years off of your overall loan and will be able to break free from the debt sooner. Additionally, you will save dollars in interest if you pay the loan off earlier.
Conclusion
Use our simple tips above so you can enjoy a debt-free retirement and achieve the financial freedom you deserve.
If you need a financial adviser on the Gold Coast, turn to New Wave Financial Planning. We embrace the best technologies to tailor the advice process for every client. Get in touch with us today!
