Figuring out how to pay off debt while also saving for retirement is a common dilemma for many consumers. A good way to approach this challenge is to think of how to make you rmoney work as hard for you as it possibly can. The first step is to review your budget and determine how much money is available each month to pay off debts, along with how much you can afford to save for retirement.
With respect to debt payments, the most effecient way to pay them off is to do the following:
List debts in descending order according to interest rate.
Make minimum payments each month on every debt, except the one with the highest interest rate.
The highest interest rate debt receives not only the minimum required payment, but as much extra cash as your budget says you can throw at it until it is paid.
Once the highest interest rate debt is paid in full, ADD this payment amount to the minimum paymen ton the next debt in the list and repeat this process untill you are debt-free.
If you are saving for retirement through your employer's retirement plan (401(k), 403(b), or similar), save at least as much of your paycheck as the employer will match. For instance, if your employer matches the first 3% of your salary contributions, then save at least 3% of each paycheck in order to receive this additional "free" money from your employer.
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