With recent statistics showing that Canadians are carrying more debt than ever before, many of us face a tough choice – pay down debt now or save for retirement? But according to personal finance experts, it’s possible to have the best of both worlds.
“Taking a proactive approach to your finances can allow you to both save for retirement and pay down your debt,” explains Wade Stayzer, vice president of sales and service at Meridian, Ontario’s largest credit union. “By determining your financial goals and working with a trusted financial advisor to build a plan to achieve them, you’ll find that the payoff is well worth the effort.”
Here are his top tips on how to save for your retirement while tackling debt.
Get a personalized financial plan. Working with a trusted financial advisor to create a personalized financial plan is like driving with a GPS system – you’ll reach your end goal faster and with less stress. Make sure you are honest with your advisor and give them the full picture. Check in with them at least once a year to re-evaluate your plan and make any necessary course corrections to keep you on track.
Be strategic. Pay off the debt with the highest interest rate first, while paying the minimum on the rest of your debts. Once that first debt is paid off, concentrate your efforts and funds on paying the next debt with the highest interest rate.
Invest automatically. Saving for the future is easy if you put your savings on autopilot.
Many financial institutions offer pre-authorized contribution plans, which automatically transfer funds from your checking account into your savings investments at regular intervals. These plans are great for contributing to RSPs or TFSAs, and if you coordinate the withdrawals to align with your payday, the money won’t even be missed.