- If you're able to be debt-free by 50, you'll have an opportunity to focus on retirement savings.
- Work on paying down your credit card balances and mortgage with extra payments.
- Buy more affordable cars to keep from taking out an auto loan.
Want to shed debt in time for your 50th birthday? Here's how.
Generally speaking, U.S. consumers aren't strangers to debt. In fact, many are surprisingly comfortable with it. But you may reach a point in life where you're ready to say goodbye to debt for good. And that point may arrive in conjunction with your 50th birthday.
Granted, a lot of people carry debt beyond age 50. But if you manage to pay yours off by then, you'll leave yourself with a number of years to divert your extra money to your retirement savings, thereby setting the stage for a comfortable lifestyle once you stop working. Here are three simple steps to lose your debt by age 50.
1. Chip away at credit card balances until they're gone
It's common for consumers to carry different types of debt. But a good bet is to start with your credit card balances on the road to shedding it. Those are apt to be your costliest source of debt from an interest rate perspective.
It's a good idea to pay off your credit cards in order of highest interest rate to lowest. Or, you can simplify the process by moving your various balances onto a new card with a lower interest rate. That way, you'll have one monthly payment to make. You might even qualify for a 0% introductory APR offer.
2. Buy lower-cost vehicles
Many people go through a cycle when it comes to auto loan debt. They buy a new car, pay it off in a few years, enjoy a few years without a car payment, and then repeat the process.
If you're eager to not have debt by the time you turn 50, you may need to get on board with purchasing inexpensive cars that you can buy outright. It may not sound like your ideal situation, but it's not an unreasonable option.
Often, you'll pay a premium for automobile features you don't end up using, or you won't end up missing in a lower-tier vehicle. And so if you're willing to stick to a lower-cost car, you might avoid auto loan debt.
3. Make extra mortgage payments
Many people buy homes in their 30s and don't pay off their mortgages until their 60s. But if you have a 30-year loan that's not set to be paid off by age 50, you can expedite things by making extra payments on your mortgage as you can.
First, you can simply make lump sum payments when extra money comes your way, such as if you get a bonus at work or a tax refund. You can also take your monthly payment, split it in half, and pay that amount every two weeks. By doing so, you'll make the equivalent of an extra payment a year. If you do that for enough years, you might be mortgage-free by age 50.
Being debt-free by 50 is a great goal to aspire to, but be sure to prioritize your debt in order of most to least costly. You might reach age 50 with some sort of balance left on your mortgage, or even a mortgage and an auto loan. But if you're able to get rid of your credit card debt in full, you'll be setting yourself up for a more secure future.
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