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5 Tips to increase saving while reducing debt

Position yourself for a more successful retirement by balancing saving, debt reduction and credit.

Man pays check with credit card

As retirement nears, it becomes even more important to close the gap between what you've saved and what you may need to retire comfortably. But how do you determine where your focus should be? Do you knock out lingering debt, or increase your savings rate while continuing steady debt repayments?

Achieving retirement readiness requires a balanced strategy, tailored to your financial situation, of saving, reducing debt and managing credit. Try these tips today:

Talk to a financial professional.

Carefully examine where you stand financially, then devise a plan to help achieve or maintain that plan in retirement. "Work with someone who can objectively look at your plan and tell you what you can do to help be successful," says Donald Hammond, MBA, CFP®, executive vice president and financial professional at Maritime Financial Group in Sheboygan, Wisconsin.

Focus on cash flow.

"It all comes down to cash flow," Hammond says. Figure out how much you have coming in versus what's going out, and adjust where possible so you have more money for retirement and paying off debt.

Balance savings and debt.

It's easy to exclusively focus on debt, but savings should be top-of-mind too. "Building liquidity and paying down debt is ideal," Hammond says. Continue to contribute to your retirement accounts while paying down debt. If your employer offers a matching contribution, take advantage of that to help maximize your savings and still have money to pay off debt.

Prioritize debt reduction.

Start early and chip away at it. "Don't wait until there is a serious debt crisis to begin prioritizing and paying down your debt," says Hammond, who recommends prioritizing debt using these steps:

  • List your debt from the highest interest rate to the lowest.
  • Pay off the highest-interest cards and loans first, paying more than the minimum each month.
  • Continue to at least make minimum payments on the rest.
  • Work your way down until everything is paid off.

Also look at consolidating to a lower-interest-rate card to reduce the monthly interest charge. "This means more money goes toward paying down principal," Hammond points out.

Use credit cautiously.

How you manage credit depends on your financial situation, Hammond says.

  • If you carry credit card debt: "Just because you have a box of chocolates doesn't mean you have to eat them all at once," Hammond says. "If you're in the hole, don't keep digging. Work toward paying off your credit card debt."
  • If you're essentially debt-free: Continue to use credit. Not using it may damage your long-established credit score and make it difficult to obtain financing. Hammond recommends charging a little bit each month and paying your balance in full at the end of the month.

Take Action.

Plan next steps with a financial professional Plan the next steps to improve your retirement readiness and connect with a financial professional.


Donald Hammond and Maritime Financial Group are not an affiliate of any company of the Principal Financial Group.

The subject matter in this communication is provided with the understanding that The Principal® is not rendering legal, accounting or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax or accounting obligations and requirements.

Insurance products and plan administrative services are provided by Principal Life Insurance Company. Securities are offered through Princor Financial Services Corporation, 1-800-547-7754, Member SIPC and/or independent broker dealers. Securities sold by a Princor® Registered Representative are offered through Princor. Princor and Principal Life are members of the Principal Financial Group® (The Principal®), Des Moines, IA 50392. Certain investment options may not be available in all states or U.S. commonwealths.

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