If you’re facing a mountain of bills, chances are you’ve drowned out even the most urgent warnings to save for retirement.

You’re not alone. No matter who’s doing the polls or studies, results show that Americans are awash in debt.

Three-quarters of households have debt with a median level of $55,300, according to the policy group Demos. Just 41 percent of American households save on a consistent basis. Roughly half of all credit card holders have lingering balances that now average $12,000 to $13,000, says the Consumer Federation of America. Among the six out of 10 households that haven’t saved for retirement in the past six months, 27 percent were allocating extra funds to pay off credit cards, a Fidelity Research Institute study found.

No wonder all that traditional retirement advice about saving abundantly and investing shrewdly seems like a ridiculously unrealistic goal for so many.

Professional financial planners generally agree that getting rid of debt should be your No. 1 priority. “The best investment you can make is to pay off credit card debt first,” says Stephen Brobeck, president of the Consumer Federation of America.

Not convinced? Stocks have historically gained 10.4 percent annually while bonds have earned 5.4 percent a year on average, according to Ibbotson Associates. But credit card fees frequently run higher than that — 18 percent and higher. “All the people who are making two or three late payments are paying penalty rates of 25 to 30 percent,” says Brobeck.

That said, paying off debt is not a free pass to put your retirement on permanent hold. Instead, you need to embrace strategies that can help you achieve the dual goal of digging out from under the bills so you can then catch up on retirement and move ahead in the future.

9 steps to save for retirement
  1. Get help.
  2. Make a budget.
  3. Take advantage of a 401(k).
  4. Pay off high debt.
  5. Make power payments.
  6. Be wary of consolidation or home equity loans.
  7. Build an emergency fund.
  8. Catch up on retirement savings.
  9. Don’t quit.

1. Get help.

Talk to someone who’s in serious debt and it soon becomes clear that there are few things so stressful as being burdened by financial worry. It’s not uncommon to lie awake at night, fretting about the bills. Financial stress can take an emotional and physical toll on the entire family.

With that in mind, the first thing you should do is make life a little easier for yourself and get support. A reputable counselor can help you craft a specific plan to tackle your debts. This may entail anything from making a budget you can stick to, acting as a mediator to negotiate lower interest rates from creditors or offering continuing encouragement as you tackle the hard work of becoming debt free.

How do you find such assistance? Be aware that debt counselors aren’t created equal, so you don’t want to flip open the phone book and pick just anyone. If a so-called expert demands fees for their services or promises overnight results, look elsewhere. Instead, look for a nonprofit counseling center that will help you regardless of your ability to pay.

You can find this kind of reputable help from the National Foundation for Consumer Counseling (NFCC). The NFCC offers a nationwide network of nonprofit agencies that are accredited to help debtors, on their Web site www.nfcc.org. Fees range from $25 to $60, but don’t let that put you off. If you can’t pay, the fees should be waived.

“Our primary tenet at our agencies is that no one will be turned away, regardless of their ability to pay,” says NFCC spokesman Nick Jacobs.

2. Make a budget.

The only way you can craft a plan is to know what you spend now. This is where a debt counselor can help. Whether you seek assistance or not, it’s critical to figure out where your money is going each month and devise a spending plan that you can stick to.

It should be easy to identify big-ticket items for fixed expenses like rent or mortgage, car payments, insurance and so on. Nailing down incidentals and variable costs can be tricky. Be thorough. Look at your checkbook, or keep every single receipt then go over them at the end of the month. Do it again until you’re certain you know what you typically spend. What are you spending on groceries, or cosmetics and clothes, or eating out? Close to fifty cents of every dollar spent on food is at restaurants, according to Dee Lee, a certified financial planner and author of “Women & Money.”

Once you know where the money is going, you can start making choices about where you can cut back. You may be surprised how much that money’s worth over the long haul. For example, quit spending $7 a day on lunch and brown bag it instead for $2.60 and you could save about $1,100 in a year. If that money had been saved and invested in retirement fund for two decades, you would have $61,340, assuming you earned a robust 9 percent. Use this budget work sheet to create your own spending plan.

3. Take advantage of a 401(k).

There’s only one time that planners agree you should divert money from high-cost debt to savings. And that’s with an employer-sponsored retirement fund, like a 401(k) or Simple IRA, that lets you receive matching contributions for your savings.

“If you have a 401(k) that matches fifty cents on the dollar that’s a guaranteed 50 percent yield,” says Brobeck. “That’s better than your card. If you get a match from your employer, take full advantage of that. It’s the smartest thing you can do.”

Today’s employers typically chip in fifty cents for every dollar an employee saves in his or her 401(k), up to 6 percent of salary, according to the Profit Sharing/401(k) Council of America. If you put in $4,000 away, they’ll toss in an additional $2,000.

As long as you’re in debt, though, you don’t want to put in more than the minimum required to get the match. Once you’ve done that, resume allocating money to paying off bills.

4. Pay off high debt.

In life, there’s good debt and there’s bad debt. Good debt doesn’t cost much, you may be able to write it off and you’ve spend it (presumably) on investment that will gain in value, like a home or education that boosts your earning power.

Bad debt, on the other hand, finances items like clothes, meals, or the latest electronics, things that don’t gain value and frequently are worth less once you buy them. What’s more, bad debt is expensive, often costing you more than you’d earn in most investments. The most common bad debt is debt on credit cards.

“Debt can be a tool to help you achieve dreams of home ownership, starting a business or getting a college education. But debt that’s used improperly can really mess up those same dreams,” says Lee. “If you have bad debt, make every effort to get it under control before it takes control of you.”

5. Make power payments.

Making minimal payments is critical, but hardly enough for card holders carrying hefty balances. In fact, if you make minimum payments you’ll likely wind up spending more on interest than you do on the actual balance. Let’s say, for example, that you have a $7,000 credit card bill that’s charging 18 percent interest. If you stick to a minimum-payment schedule, you’ll wind up shelling out $10,115 interest and it will take 347 months to wipe the debt clean.

Sounds simple. But what if you’ve already slashed spending and still don’t have the necessary cash to do more than tread water?

This is where some tough love comes in, says Gail Cunningham with Consumer Credit Counseling Service in Dallas. Cunningham has helped clients get out of debt for 20 years, and her advice hasn’t changed. If someone is stuck in minimum-payment mode, she recommends they make “power payments.”

That’s her polite way of telling folks to get a second job. “What I’m taking about is a part-time job and devoting all income to paying off debt,” she says. “You can even do something you enjoy. If you like music, work in a music store. Do something you like, but dedicate all of that money, no questions asked, to paying off debt.”

Sound distasteful? Perhaps. But Cunningham puts the matter simply. “Pick your poison. Stay in debt or get a job. Sometimes we have to do something in the short-term to make us happier in the long run.”

6. Be wary of consolidation or home equity loans.

Obviously, the lower your interest payments, the easier it will be to climb out of debt. For that reason, many individuals consolidate, transferring various balances into a single loan with a lower rate. Others take out a home equity loan to borrow the money necessary to pay off credit card balances.

Both are sound financial moves in theory. In practice, too many people take out an equity loan or consolidate bills only to run up new balances all over again. That only exacerbates your debt woes.

For example, a homeowner who takes out an equity loan to pay credit card debts typically added $12,000 to their mortgages and still had more than $14,400 in outstanding credit card balances, according to one study by Demos. Americans are keeping their families afloat by putting their greatest asset at risk, the report concluded.

Cunningham concurs. “My experience has shown that folks, as well intentioned as they are, end up with more debt. It’s an ingrained behavior pattern. They’re so used to charging and living beyond their means. It’s very hard to change a lifestyle,” she says.

The bottom line: If you’re consolidating or using your home to get out of debt, then you need to adhere to a strict budget to ensure the tactics work.

7. Build an emergency fund.

The last thing you need is for some mishap to add to your burden, so start saving for a rainy day. If your car sputters and dies, the boiler blows up or you lose your job, you want to be able to pay for it out-of-pocket instead of reaching for a credit card.

“Once people finish paying off credit cards, they should then take the equivalent of their payments and start putting it in emergency savings,” says Brobeck.

Ideally, you should save up three to six months worth of living expenses. If you’re single, and no one’s relying on you, you can probably get away with three months. If you’ve got others to care for, or you’re in a high-paying job that may take longer to replace, count on saving more.

8. Catch up on retirement savings.

At the same time, you’ll also need to refocus on retirement. If you’ve been disciplined about setting aside money for debts, it won’t take much adjusting to budget for savings. Experts advise you simply take the amount you’ve spent on debt and redirect it into retirement savings. If you were putting aside $400 a month to get debt free, then take that same amount and put it into your 401(k) or other retirement plan.

Remember, individuals who are 50 or older may put extra “catch up” contributions in various accounts to help them make up for lost time. For example, this year older savers can put up to $5,000 in an IRA. The upper limit for a 401(k) or 457 plan is $20,500. These levels may seem out of reach now, but there are opportunities to catch up that you should take advantage of as soon as possible.

9. Don’t quit.

The length of time it takes for a household in debt to pay off the average credit card debt now runs three and a half years, according to Demos. That’s long enough to give up, get discouraged and revert to bad habits.

Resist the temptation. There’s no getting around the fact that digging yourself out of debt is hard work. So pat yourself on the back for taking on this difficult task. Notice how your credit card balance goes down each month. Enjoy these small accomplishments. Cut back expenses, but don’t try to eliminate them entirely or you won’t stick to your budget, says Cunningham. She says she has witnessed plenty of people successfully eliminate debt during her years as a counselor.

“Know the end is in sight,” she says. “Be patient.”

Are you worried about having enough money to retire someday? Or, do you have a plan of action? Share your story

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