With the holiday season upon us many people are running up debt putting their holiday purchases on their credit cards. Running up credit card debt could be hazardous to your retirement plans.
If you’re struggling to decide whether to contribute funds to your retirement or pay down your credit card debt, I have some advice. Think of your retirement like you would a house and the credit card debt as a hole that’s in the middle of your property, before you can build your house you should fill that hole in. That’s how you should approach your retirement plan, with one exception. The only exception to this rule is that if you have a 401k or other retirement vehicle where your employer will contribute funds if you do, you should contribute and get the free money. Beyond that, pay off your credit card debt before you consider contributing more than the minimum or opening an IRA. Credit card debt will pull you down faster than retirement planning will push you up because the interest on credit cards is ridiculous and largely fixed… while you hope retirement investments will increase, that’s not guaranteed (but the debt is!).
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5 responses to “Credit Cards and Retirement Planning”
You can use a debit card as a credit card and have all the same protections as a credit card. And you cannot overspend; once you’re bank account is empty, you’re done!
In most budget classes, step number one is to put aside $1,000 for emergencies. Step number two is to pay off all debt using the debt snowball method to accelerate repayment.
Saving in an investment account or Ira is usually not until step four or five. Make sure you get your steps right!
[…] from My Retirement Blog published Credit Cards and Retirement Planning, saying, ‘With the holiday season upon us many people are running up debt putting their […]
[…] from My Retirement Blog published Credit Cards and Retirement Planning, saying, ‘With the holiday season upon us many people are running up debt putting their […]
[…] presents Credit Cards and Retirement Planning posted at My Retirement Blog, saying, “If you’re struggling to decide whether to […]