APPROACHING retirement can be a daunting challenge for anyone, but especially for those who are in debt.
A man trying to retire early recently called into a financial advice podcast looking for tips.
Calling to the Dave Ramsey ShowJack, from Cincinnati, Ohio, said he was $120,000 in debt.
At the end of the conversation, presenter Dave gave Jack four steps to “clean up this mess”.
He estimated the entire process would take two weeks or less.
THE SITUATION
“I dug myself a hole,” Jack told Dave over the phone.
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Jack recently got married after his children graduated from high school. Together, the couple earns US$200,000 a year.
Then their financial problems put their marriage in jeopardy.
“When it became the business of a relationship, the relationship changed and therein lies the problem,” he said.
With multiple credit cards racking up debt, the pair used a 401k loan to pay it off.
Now, the pair is owed $35,000 on top of their remaining credit card debt.
Jack also owed money for two expensive cars and a trailer attached to his woodworking business.
That business, he said, was failing.
The side hustle was causing the family to lose about $10,000 a year, taking up hours of their time every night and putting a strain on their marriage.
THE SOLUTION
“It seems like an expensive hobby,” Dave said. “A smelly, expensive hobby that you wish was a business.”
He summarized the problem by pointing out that they are spending more than they earn.
“I can give you four things right now, that if you do this… within two weeks you will have a completely different scenario in your life,” Dave said.
First, he said that Jack should sell his expensive cars.
Then he said to sell your trailer.
Third, he should sell the business, especially since it is not making money and is generating more credit card debt.
Lastly, he and his wife need to sit down and create a budget so they don’t overspend.
Where to save retirement money
There are several different places you can put the money you have saved for retirement. Each has different tax advantages, but not all are available to everyone.
401(k) – an employer-sponsored retirement account. Contributions are made pre-tax and many employers will match a certain percentage of your contributions. Taxes are paid when funds are withdrawn in retirement.
Roth IRA – an individual retirement account. Contributions are made after taxes, but withdrawals in retirement are not taxed.
TSP (Thrift Savings Plan) – a retirement savings and investment plan for federal employees and members of the uniformed services. They work similarly to 401(k)s, but may have more limited investment options.
Pension – an employee benefit that obliges the employer to make payments to the employee upon retirement. Pensions are becoming increasingly rare.
MORE TIPS
The Internet and media have given people a convenient way to find basic financial advice.
Dave recently helped a 60-year-old with nothing saved for retirement.
He also gave a 66-year-old woman a tip that would “drastically change her situation.”
Another retirement advice influencer, Drew Blackston, recently helped a 55-year-old man struggling to retire.
Blackston recently shared his “$25” tip directly with The US Sun.
This story originally appeared on The-sun.com read the full story
