Kevin O'Leary: Here's the Age When You Should Have Debt Paid Off

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Planning for retirement when you first begin your career seems like a waste of time for many people.

But in order to retire in your 60s, starting down the right financial path early by saving and minimizing debt should be a priority.

Shark Tank Investor and personal finance author Kevin O’Leary says putting the effort forth now can off in the long run.

“People today don’t spend enough time thinking about the future and what they’ve got to save for when they get old…”

“It’s not easier when you’re older to make money – it’s easy to make money when you’re younger.”

He goes on to share, “You’ve got to save it while you’re making it – that’s the whole idea of financial freedom.”

As we get older, our spending habits, responsibilities, and potential debt increases.

The more you’re able to save now, the less you’ll need to stress and worry about your financial future.

“Think about life,” O’Leary explains. “You go to college – student debt. Then, you find someone, you get married, you buy a house, more debt – that’s called a mortgage. You have kids, more debt – getting them through school.”

The key is to start planning as early as possible for how you will navigate through times in life when the likelihood of attaining debt may be higher.

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When should you aim to have it all paid off? 

O’Leary suggests the golden age of 45 years old.

“The reason I say 45 is the turning point...is because think about a career – most careers start in early 20s and end in the mid-60s, so when you’re 45 years old, the game is more than half over, and you better be out of debt, because you’re going to use the rest of the innings in that game to accrue capital.”

Start today: O’Leary and other experts offer these tips to plan for retirement and pay down debt.

1. Save and Invest for the Long Term

“Always ask yourself if you’re buying something – do I really need this? Is this something I have to have? Most of the time the answer is no. So don’t buy it,” says O’Leary.

“Instead, invest the money so you can get to that equilibrium a lot sooner.”

Be cautious about spending can help you avoid notoriously high credit card interest rates.

It also gives you more capital to invest and put towards the future. By taking advantage of compound interest, your money can grow while you sleep (which may be better than whatever you were thinking about buying).

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2. Think Carefully About a Mortgage

Debt is debt, but not all debt is the same. Mortgages, for example, can be leveraged as an appreciating asset, unlike other types of debt.

“Mortgages are more of a grey area than credit card debt because real estate can be an investment,” O’Leary says.

“In my opinion, [however], most people in their 20s, or even 30s, have no reason to be taking on that kind of debt...homes don’t always gain as much value as you expect – at least not anymore and at least not quickly.”

If you do decide to take on a mortgage, be sure to ask your lender the right questions and develop a plan to pay it off as quickly as possible.

“There’s never an incentive to stay in debt. Life is unpredictable.”

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3. Make a Plan to Pay Off Debt

If you’re already in debt, commit to a monthly strategy to pay it off.

One common strategy experts advise is using the snowball method, which involves ordering all of your debts from smallest to largest, and focusing on paying down the smallest debt first. Then, the next smallest debt, and the next, and so on, until all of your debts have been paid.

The avalanche method is another commonly suggested strategy that prioritizes paying off debts in a specific order, but not by total outstanding amounts. Instead, you’ll want to focus on paying off the debt with the highest interest rate to help minimize the amount of interest paid over time.

Deciding which approach to paying down debt is a personal choice, but it’s good to review the pros and cons of each method before making a decision.

4. Don’t Neglect Your 401(k)

If your employer offers a 401(k) retirement plan, commit to signing up and contributing the full amount that may be matched by your employer as a bare minimum way to save.

Company matches for 401(k) plans are essentially free money, yet one in five people still don’t contribute enough to get the match, according to data from Alight Solutions.

Missing out on free contribution matches is the biggest mistake Americans are making in saving for retirement, according to experts.

 

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