Millionaire Habits - Retiring Debt Free

By definition, debt is something (typically money) borrowed from one party to another, with the condition that it will be paid back at a later date, usually with interest. Between student loans, mortgages, car payments, credit cards, and more… debt is constantly a variable that is exposed throughout each stage of life. Although the concept is simple enough, the complexities that surround consumer debt can be a detrimental factor in any retirement plan if it’s not closely monitored. 

Now, take a deep breath and imagine what your life would be like if you didn’t owe anyone anything. Pretty nice, right? Unfortunately, as nice as it would be, you can’t just make debt disappear, but with a few intuitive tweaks, you can certainly work towards reducing it. 

That’s why at Fullerton Financial Planning, we want to remove the mystique of approaching debt by giving you a few strategies to help you live retirement in confidence. Ready to get started? 

Understanding Your Debt

Before you start repaying your debt, it’s important to take a moment to identify the type of debt you have. Generally, debt either falls into the category of either installment loans (mortgages and home equity loans, student loans, and personal loans) or revolving debt (credit cards, home equity lines of credit, and personal lines of credit).

These two types of debt can then be broken down further into two types:

• Unsecured Debt - Debt that has no collateral backing. If the borrower defaults, the lender must initiate a lawsuit to collect what is owed. Since issuing this type of debt is solely based on the borrower’s credit, the requirements can be pretty rigorous. 
• Secured Debt - Debt with collateral backing from the borrower. In layman's terms, a secured debt instrument simply means that in the event of the borrower defaulting, the lender can use the asset to pay off the deficit. The two most common examples of secured debt are mortgages and auto loans.

Prioritize by Interest Rate

With different types of debt comes different interest rates. Debts with a higher interest rate generally will cost you more money in the long run, compared to debts with lower interest rates, even if the amount of principal you owe is the same. If you have a high-interest rate debt, consider using the “debt avalanche” method to pay it off first. 

For example, if you owe $15,000 on a car loan to be paid over 5 years, with an interest rate of 5%, you’d end up paying roughly $16,984, or $1,984 in interest. The same loan, paid over the same amount of time, but with a 7% interest rate, will cost you $17,821-- which is almost a $1,000 increase in interest paid. By paying off your debt with the highest interest first, you could reduce your total cost over time. 

It’s important to still pay the minimum amount owed on all debts, so we recommend focusing any extra money you can spare on the debt with the highest interest rate. Although you may not see any results immediately, if you stick to the plan consistently it could lessen the time you’re in debt, since less interest is accumulating.

Cut Your Costs

Although debt is a major cause of stress for Americans, most are not ready to sacrifice certain aspects of their life to become debt-free. According to a recent survey by Tally, over 52% of Americans that have found themselves in debt say they wouldn’t give up their cell phone, and 34% say they wouldn’t abstain from dining out.

Regardless of how much money you make, debt can still be a prevalent barrier to your financial freedom if you’re not willing to stick to a budget. That’s why having a basic understanding of your cash flow is a huge part of getting on track to becoming debt free. A good place to start can be as simple as cutting down on some of your monthly or yearly subscriptions.

When was the last time you looked at your recurring expenses? Gym memberships, cable TV, online streaming, and other recurring subscriptions can add up quickly. That’s why roughly 84% of Americans are underestimating their monthly spending. Although a few dollars “here and there” per month may not seem like a lot, when you actually do the math, convenience can be costly.

If canceling your subscriptions altogether feels too drastic, consider seeking out more affordable alternatives. Sharing a Netflix subscription with your friends, or even using a day pass at a gym (instead of a yearly membership) can help relieve you financially.

Speak with a Professional Today

At Fullerton Financial Planning, our goal is to help you navigate your retirement journey. Our certified fiduciaries and experienced investment advisors have decades of combined experience helping people find answers to difficult financial questions. Sit down with a Fullerton Financial Advisor today to discover if you are on the right track for your retirement goals.



We understand how important your financial future is to you and your family; we also understand how difficult making these plans can be. Investment vehicles are essential to any financial plan. When you schedule a call with Fullerton Financial Planning, we’ll help you decide which investment vehicles fit your specific plan and lifestyle.

Don’t leave your financial future to chance. Let us help you create a personalized plan so you can enjoy the retirement you’ve worked so long and hard for.