If you asked me two years ago “How to do ensure I’m on track for retirement” it would have taken a long back and forth discussion. I would ask questions then punch the numbers. Then ask more questions, and keep punching the numbers. (Keep in mind, at that time, I was a financial advisor and retirement planner for 23 years.) In the end, it would not have been a quick answer.
Now I can give you an answer in one simple explanation. It’s what I call DIAL™ into Retirement. In each part of the DIAL I outline the four core financial pillars you need in place in order to retire at any age. When I developed this system, my goal was to simplify the retirement planning process, because as we all know, deciding on when and how to retire can be complicated.
Let’s get started with the first core financial pillar you need to get in order so that you can retire.
Merriam-Webster’s defines debt as “a state of being under obligation to pay or repay someone or something in return for something received: a state of owing”. You’ve probably heard this before: there are three types of debt – good debt, bad debt and no debt.
First of all, there is no such thing as good debt. No debt is good. Debt is a four letter word and there is nothing good about it. If you owe money on a home that is appreciating in value, then you have an asset. But it’s not always a slam dunk to have an asset you are in debt for. Sometimes assets go bad, such as if your home loses value and becomes worth less than what you owe. That home has just gone from an asset back to a debt.
Another type of debt, often called bad debt, is something that you’re making payments on that is either costing you something monthly to hold (think of the interest on credit cards) or it’s depreciating in value over time (such as a car that you’re making payments on.) Having a bunch of this type of debt can leave you with less financial flexibility and can cause unnecessary worry. The last thing you want to do in retirement is worry about money.
A lot of debt can easily delay your retiring early plan.
Obviously, having no debt is the absolute best position to be in. For years I’ve suggested my clients get their credit cards to a zero balance, have no car payments and be mortgage free when they are retired. If you can get in this position prior to retiring, then you will be free from the weight of debt. If you do have debt, as long as it is in order within the rest of your DIAL™, retiring on your own timeline is still a possibility.
Investment Advisory Services offered through Shankland Financial Advisors, LLC, Registered Investment Advisor