5 ways to pay off debt while saving for retirement

You've settled into your career and have a little extra money in your pocket. What do you do with it？ Should you knock out your debt or save for retirement？The good news is that it doesn't have to be an either-or question. It's all about finding a balance. Here are five strategies for addressing both of these long-term financial goals.1. Examine your earnings and expenses.“It all comes down to cash flow,” says Don Hammond, a Principal® Securities Registered Representative and Financial Advisor in Sheboygan, Wisconsin. “Figure out how much you have coming in versus what's going out and adjust so you have money for retirement and paying off debt.”Use a household budget worksheet (PDF) to help free up money each month to put toward debt reduction and/or savings. Look at recent bills, plus bank and credit-card statements, to gain greater insight about your expenses.Of course, more income helps. Many people have a side job to earn extra money. Maybe you can be a math tutor, make earrings for the local art fair or join the ranks of Uber drivers. Search for “side hustle ideas” to get started.2. Beef up your savings.Try to keep long-term savings goals top-of-mind. “Building liquidity while paying down debt is helpful,” Hammond says.It can also be smart to contribute to your retirement accounts while paying off that debt. If your employer offers a matching contribution on a 401(k) or 403(b) retirement plan, put away at least the minimum so you get the match. It's sort of like free money, and it adds up.Even a 1% bump in your retirement plan deferral can make a big difference over time.3. Make debt reduction a priority.Start early and chip away at the amount you owe. “Don't wait until a serious crisis to prioritize and pay down debt,” says Hammond. Instead, aim to:Make a list of debts from the highest interest rate to the lowest.Pay off the highest-interest credit cards and loans first by paying more than the monthly minimum.Continue to make at least minimum payments on the rest.Once you've paid off a debt, consider putting that same monthly amount toward retirement savings — and pat yourself on the back while you're at it.4. Be cautious about credit.How you manage credit depends on your financial situation, Hammond says.If you carry a credit-card balance, be careful to avoid increasing it. “Just because you have a box of chocolates doesn't mean you have to eat them all at once,” Hammond says. “If you're in the hole, don't keep digging. Work toward paying off your credit cards.”If you're essentially debt-free, you can continue to use credit — within reason, of course. Why？ Because not using it may damage your long-established credit score and make it harder to get financing when you really need it. Hammond suggests charging a little bit each month and paying the balance in full each month. That's the key part: paying in full.5. Talk to a financial advisor.To plan for your future, you first need to know where you stand financially. Then, if you want assistance, contact a financial advisor for help with your personal finance strategy.Next steps:Use this Retirement Wellness Planner by Principal® Financial to see if you're on track with your retirement goals. Could you contribute more to your 401(k)？Free up money to put toward debt reduction and/or saving with this household budget worksheet (PDF). Sign up for a free monthly newsletter to help you learn more about saving money, managing debt, and more.Learn more about how Principal® Financial can help you reach your financial goals.This post was created by Principal® Financial with Insider Studios. The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.Insurance products issued by Principal National Life Insurance Co. (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Securities offered through Principal Securities, Inc., 800-247-1737, member SIPC and/or independent broker-dealers. Principal National, Principal Life, and Principal Securities are members of the Principal Financial Group®, Des Moines, Iowa 50392. ©2019 Principal Financial Services, Inc. Principal, Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.