Saving for retirement can feel overwhelming if you’re already dealing with debt. From personal debt and student loans to credit card balances or medical bills, debt obligations can make retirement planning feel out of reach.

The good news is that with the right plan, smart habits, and dedication, you can conquer debt while setting money aside for retirement.

If you’re ready to regain control of your finances and start preparing for the future, here are seven practical tips to help you pay down debt and grow your retirement savings at the same time.

1. Find Out Where You Stand

The first step in overcoming debt is understanding your complete financial picture — even if the thought of doing so is overwhelming.

Take inventory of your income, monthly expenses, and every debt you owe. As part of your evaluation, complete the following steps:

1. Making a list of balances, interest rates, and minimum payments for each account.
2. Identifying which debts are good, like low-interest mortgages, versus bad, such as high-interest credit cards.
3. Tracking your spending to see where your money goes each month, including essentials, like utilities and mortgage payments, and discretionary spending, like dining out and entertainment.

This baseline assessment helps you identify the fastest ways to free up cash for debt repayment and retirement savings.

2. Organize and Track Your Finances

Once you know where you stand, create a system to track your finances consistently. Budgeting apps like Minty, YNAB, or EveryDollar can help you categorize spending, set payment reminders, and see where small cuts can collectively have a big impact.

As you track, cancel unused or unnecessary subscriptions, reduce discretionary expenses, and reallocate newly freed-up funds toward your debt. The more visibility you have into your cash flow, the easier it is to spot opportunities to lower your debts.

3. Increase Your Income with Side Hustles

Consider adding a secondary income stream if you want to pay down your debt faster. This can include:

• Freelancing using your professional skillset, such as writing, graphic design, tutoring, etc.
• Gig economy jobs, like delivery driving, ride sharing, or pet sitting.
• Selling items you no longer use or need, such as furniture, video games, or clothing.

Even a few hundred extra monthly dollars can significantly shorten your debt payoff timeline. In some cases, side hustles can also boost your professional portfolio, which can help you unlock future gigs or full-time roles.

4. Make Extra Payments Whenever Possible

Debt isn’t what you borrowed or spent; it’s the interest that accrues and represents the actual cost of your debt. Paying even slightly more than your minimum payment each month can shave months (or years) off your repayment schedule and the interest you pay.

Making an extra whole payment is always beneficial, but even rounding your payment to the nearest $50 or $100 can have a significant impact over time. Applying tax refunds, bonuses, or side-hustle income directly to your high-interest balances is also an excellent way to chip away at debt.

The more you can reduce your principal balance (what you borrowed initially or otherwise owe), the less interest you’ll pay in the end.

 5. Create a Payoff Plan

A clear payoff plan keeps you focused, makes it easier to track progress, and reduces stress. There are several ways repayment paths you can choose, but two common ones include:

• Snowball method. Pay off the smallest balance first for quick wins and fewer bills on your plate.
• Avalanche method. Target the highest-interest debt first to save the most money in the long term.

As you execute your repayment plan, set, track, and celebrate milestones. Doing so acts as a friendly and sometimes much-needed reminder that your efforts are leading to progress.

6. Try to Lower Interest Rates

High interest rates can make paying off your debt harder (and more expensive). Fortunately, there are some circumstances under which you can lower your interest rates. Here are some steps to take:

1. Call creditors to negotiate lower rates.
2. Transfer balances to a 0% APR credit card, but make sure you can pay it off before the promotional period ends.
3. Consolidate loans into a single, lower-interest loan.

Even a slight drop in interest can free up more money for your retirement savings and help you reduce your debt faster.

7. Set Pay-Off Goals (and Rewards)

Debt repayment can be a long and frustrating process. Breaking your debt into smaller, more achievable bits can help you stay motivated.

For instance, set a goal of paying off one credit card bill in six months or 50% of your loan down in a year. Once you meet these milestones, reward yourself with low-cost experiences.

You can also tie your repayment efforts to bigger life goals. Why are you aiming to pay down your debt fast? Whether you plan on buying a house, getting a car, or taking a vacation, have something to reach for. Whatever your reward, setting that goal will be all the sweeter when there’s a prize at the finish line.

Paying Off Debt for Good

You don’t have to bear the burden of debt forever. Take control of your finances and set your pay-off goals today. Monitor your spending, set achievable goals, and motivate yourself to gain financial freedom. Before making any financial decisions, consider speaking with a financial advisor. A debt-free future awaits!

FAQs

Should I pay off debt before saving for retirement?

It depends on your interest rates and financial goals. If your debt has a high interest rate (over 6%–7%), focus on paying it down first. But if you have low-interest debt, you may be able to contribute to retirement while making steady payments. Nevertheless, the earlier you save for retirement, the easier it will be to build compound interest and retire.

What’s the best strategy to pay off debt quickly?

The debt avalanche method saves the most money on interest, while the debt snowball method offers faster psychological wins. Choose the one that keeps you motivated.

How can I pay off debt with a low income?

If you have limited means to pay off debts, create a bare-bones budget and prioritize your highest-interest debt. Look for ways to increase income through side hustles or selling unused items, and direct all extra money toward repayment. Even small, consistent payments can add up over time.