Financial Health Checkup

March 27, 2018

Diagnose Your Debt and Make Saving for the Future Easier

It's rare not to have any debt during your lifetime, and not all debt is bad.

Good Debt

There's a 'good debt,' which is debt that can help you make money and increase you net worth. Financing a house or getting a student loan for college may be good investments, for example.

Bad Debt

There's a 'bad debt.' These are purchases that won't go up in value or generate income. High credit card debt to make ends meet or buying a new car are examples.

Whether good or bad, debt can spiral out of control and put you in a financial health crisis. Like a virus, debt can spread to other areas of your financial life and make it hard to cover even your everyday expenses.

When you're in heavy debt, covering a financial emergency and saving for retirement may seem out of the question.

The average household that's carrying credit card debt has a balance of $15,654.

​- NerdWallet, 2017

Only 37% of Americans have enough savings to cover a $500 to $1,000 emergency.

​- Bankrate, 2016

The average student in the Class of 2016 has $37,172 in student loan debt.

- Federal Reserve Bank of New York, 2016

Start Here: Diagnose Your Debt

It's always a good time for a financial health checkup. Calculating your debt-to-income ratio — or DTI — is a great way to check that your debt load falls within a healthy range.

Your DTI can help you change some money habits and better manage your debt. Calculating your DTI also helps your overall financial wellness, because lenders use it to decide whether to offer you credit and what rate to charge. They pay attention to research that shows people with high DTIs have more trouble making their payments. 

Complete the Diagnose Your Debt Worksheet for a quick financial checkup.

Find Remedies to Reduce Your Debt Today

These are the two basic remedies for lowering your debt. Both can help you improve your overall financial health.

Medicine

High Interest Regimen

​This remedy, also called Debt Avalanche, targets your highest-interest-rate debts first. It lets you repay debts in the shortest amount of time and saves you the most interest.

Bandage

Small Balance Therapy

This remedy, also called Debt Snowball, targets your smallest debts first, no matter the interest rate. If you're motivated by small victories, this remedy helps you gain the momentum to reach financial wellness.

Saving for Tomorrow

When you've set up a plan to lower your debt, you're on your way to removing obstacles to saving. Don't wait to enroll in your company's retirement plan or increase your contribution if you're already enrolled.

Check out these guidelines to saving for retirement at each life stage.

Age 30

Target Savings Goal: 
​10-15% each paycheck

Aim to Save: 
1x annual salary

Age 45

Target Savings Goal: 
​15%-20% each paycheck

Aim to Save: 
3.5x annual salary

Age 60

Target Savings Goal: 
​20% each paycheck

Aim to Save: 
7x annual salary

Keep up the momentum toward building financial strength. Enroll in your plan or log in to increase your contribution.

 

More About Saving for Retirement
Explore your options for meeting two important financial goals — paying down your debt and saving for retirement.
Only about one-third of Americans are saving for retirement. That adds up to a lot of people who'll struggle financially after they stop working.
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