During retirement, you’ll only live on a fixed income consisting of your savings, investments, Social Security benefits and passive income. Debt will subtract significant amounts of your retirement savings, so eliminating debts now is a crucial step to ensure you won’t lose any of your financial freedom when you’re older.
There are many ways you can eliminate debt, luckily. Use either the snowballing method or the avalanche method, whichever one fits your needs best.
First, list all your debt from highest to lowest interest rate. Many people, for example, prefer to get rid of the one with the highest interest first. Others like to take it slow so they won’t feel overwhelmed and start with the lowest.
Whichever method you chose, make sure you have a plan to get rid of that debt before you retire!
Establish Passive Income Streams
The earlier you want to retire, the more money you need in order to fund more years of your life. That involves working more while you can, but there are only so many hours in a day, and you certainly don’t want life to pass you by for a couple of years while you build your retirement fund, do you?
That’s where passive streams of income come in. These allow you to work less (after you set them up) so that the money will come in without you having to lift a finger… well, in most cases you might have to do some maintenance, but that’s still less than what you’d have to do compared to a regular job.
One of the best ways to do this is to start looking into real estate: either investing in properties or renting out houses, apartments, rooms, etc. Alternatively, you can continue doing what you, in a sense, by tutoring or becoming a consultant!