Retirement Financial Planning Means Avoid Debt And Credit Problems

High debt and misuse of credit cards make it tough to save for retirement. Money that goes to pay interest, late fees, and old bills is money that could earn money for retirement and other goals. How much debt is too much debt? Debt isn’t necessarily bad, but too much debt is. Add up what you pay monthly in car loans, student loans, credit card and charge card loans, personal loans — everything but your mortgage. Divide that total by the money you bring home each month. The result is your “debt ratio.” Try to keep that ratio to 10 percent or less. Total mortgage and nonmortgage debt should be no more than 36 percent of your take-home pay.

What’s the difference between “good debt” and “bad debt”? Yes, there is such a thing as good debt. That’s debt that can provide a financial pay off. Borrowing to buy or remodel a home, pay for a child’s education, advance your own career skills, or buy a car for getting to work can provide long-term financial benefits. Bad debt is when you borrow for things that don’t provide financial benefits or that don’t last as long as the loan. This includes borrowing for vacations, clothing, furniture, or dining out.