Becoming a master of your financial fate is possible at any age and from any financial situation. You just need to adhere to a few rules: get rid of your debt, spend less than you earn and invest sensibly. For those looking at retirement, that means going from your savings account to a real IRA that will let you make more sense from a tax perspective and for your long term savings.
Get Rid of Debt
Getting out of debt is the first step. Throughout the United States in 2017, total credit card debt for consumer rose to $905 million. The average household has more than $15,000 in debt. That is not sustainable. If you fall into that camp, you need to get your debt under control and get it under control soon.
Calculate Your Credit Card Debt
The first step to getting your debt under control is figuring out exactly how much credit card liability you actually have. Break out a spreadsheet and your bills to make a good accounting of what the balances are, compare how much the interest is and the minimum payments. That will give you an idea of what you need to take care of in a month. Once you know what your monthly nut is, you can figure out how to reduce that down with consolidation and paying off the smaller balances.
Make Snowball Payments
Ideally you want to pay off the highest interest debt first. That will give you more money to play with each month and more money to roll into other debt. But the psychological reality is that you need to rack up small wins, so you can start to take down most of the debt over time. That is the snowball effect. Get the ball rolling down the hill by paying off small balances and then you can use that momentum. Or you could go with the avalanche. Put all your money towards the card with the higher interest. Then you tackle each card in succession by going after the next lower interest rate.
Consider Debt Consolidation
Look to debt consolidation options if you can. Try to transfer what you can to a zero interest credit card, so you can tackle the principal. Or, if you have equity in your home, use what you can to consolidate all your debt into a home equity loan, which should have a lower interest rate than any of your credit cards. That means that you can also simplify your life by taking down your multiple payments and multiple credit card websites to a single payment.
Taking care of your debt is important, but you can start spending wildly yet. You want to put away as much money as possible into your IRA or other investment vehicles, so you can go from red to black. You want to build your wealth. That is how you get to be comfortable in old age and get to the state of financial freedom that you actually want. Saving for your IRA starts with saving yourself from debt slavery. It only gets easier from there.