Below is a guest post from my friend, Amy Nickson. She’s a professional finance writer and content marketer based in Atlanta, Georgia. You can also follow her on workingmomsword.com, where she blogs on a regular basis. The views expressed by the author do not necessarily reflect my views.

Whether to prioritize a retirement saving or pay off debt is a vital question to assess for people who are in debt. Some people think that paying off debt first makes sense. But what about the retirement? If you don’t save for your retirement, you may have to work for a longer time than an average retirement age. The dilemma is genuine.

On the other hand, the conventional wisdom says that people should start saving money for their retirement before paying off debts. Because, the sooner you start saving, the more time your money will get to grow.

If you have multiple debts with a higher interest rate, then the debts are costing you more money every day. Because it is a matter of assessing the interest rate that you are accumulating. You are actually losing money by paying the interest rate on the debts. You have to take initiative to pay them off to save money on the painful interest rate.

For example, paying off your higher interest rate debt (15% APR) can help you to save the 15% that you had been losing by paying the interest rate.

So, it makes sense to pay off all debts before savings for the retirement.

You should have an emergency fund first

Before you start working on any financial goal (saving for retirement, buying a house, buying a car), you should build an emergency fund. Without it, your hard-earned savings can be erased. Remember, emergencies are uncertain; you should be prepared for it. If you don’t have enough money for the emergency, then you have to take out a loan or use your other savings (retirement fund) to manage the situation. You may fall into debt to overcome an emergency. Thus, you will not be able to achieve your other important financial goals.

Once you save 3-6 months of expenses in an emergency fund, you can easily start working on other goals.

Why is saving for retirement important?

After building an emergency fund, you should start saving for your retirement. It is important because when you retire, the main source of income will stop. Thus, you have to save enough money so that you can maintain your current lifestyle in your retirement. Some people think that they are too young to save money for their retirement. Remember, there is no age for saving money to secure your future. In fact, The sooner, the better.

• Saving for retirement regardless of having debt is not a problem if your employer matches the 401(K) contribution. Saving 3%-6% of your monthly salary into the 401(K) can give a good return when you retire, However, make sure you start saving into a retirement account as soon as you start earning. By contributing money into a 401(K), you are getting an instant return. You should try to save up to the amount that your employer match.

• People who don’t have an employer match should start saving for their retirement as well. They can save money on a self-directed ROTH IRA to secure their retirement.

When you should start saving for your retirement first

To decide whether or not you start saving for retirement, you need to analyze your financial situation first.

• If you are nearing your retirement, then you must prioritize your retirement savings before paying off the debt.
• If the debt amount is small, then you can make the minimum payments on your debts while saving for your retirement.

How can you progress on saving for your retirement?

You have to start somewhere to secure your retirement savings. However, you need to be wise when giving the effort to achieve a goal.

Saving for retirement is important. But what amount should contribute to retirement savings depends on many factors.

If you have just started working and you have a student loan debt, you should start contributing at least 5% of your monthly income toward your retirement fund. When the budget is tight, you have to allocate money wisely. Because you have to manage your other financial obligations (Basic living costs and student loan debt, and emergency fund).

As your income increases, you should focus on increasing your retirement savings while using the additional money to ache other non-retirement goals.

When you should pay off your debts first

In some cases, it makes more logical to get off of the painful debts before saving for the retirement. Here’s why:

People who are younger and not yet receive retirement savings benefit from their employer should concentrate on paying off their painful debts first.

Why is paying off debt important?

• If you have accumulated a huge credit card debts, car loan, or personal loan, then you should try to pay them off as soon as possible. Because the higher interest rate debts are actually costing you more money. By paying off the debts, you can save on the interest.
• Having a lot of debt can damage your credit score severely. Your credit score determines how well is your financial health. The creditors or lender may consider you as a risky borrower. You will not be able to get a good loan term, rent, or a good job due to a bad credit score. So, you need to pay off your debts as soon as possible to build a good credit health.

Tackle your debts to move forward to other goals

Having a huge debt is a pressure that can take a toll on your lifestyle. You are worrying about your debts and losing the peace of your mind.

Getting out of debt can free up your mind and inspire you to move forward to achieve other financial goals.

Thus, you shouldn’t delay making the debt repayments. There are many debt repayments options. Some are professional debt relief services like debt management, debt settlement, and debt consolidation.

If you have accumulated multiple credit card debts with higher interest rates, then you may consider credit card debt consolidation. It is a professional debt relief method that helps you to pay off your costly credit card debts faster.

Some debt repayment strategies that you can manage on your own like debt snowball, debt avalanche, and balance transfer method. Pick the right one to kill your debts. After that start saving for your future.

Resource: 5 ways retirees can tackle their credit card debts

Why should you pay off debt and save money for retirement simultaneously?

As per the financial experts, people should try to make debt payments and save for their retirement simultaneously.

How can you do that?

Saving for the retirement is equally important as paying off debt. Even though your retirement is decades away, you should start saving for your retirement.

A little effort can help you to maintain both situations.

• Formulate a budget.
• Include the debt payments and retirement savings as your mandatory expenses.
• Eliminate unnecessary expenses to free up more money.
• Consider side hustle to boost your income.
• Talk to a financial advisor for advice.

Lesson: You should live a debt-free lifestyle to achieve financial freedom easily

In a survey conducted by the Employee Benefit Research Institute and Greenwald and Associates, 28% of people agreed that they have less than $1,000 for their retirement.

As per the Federal Reserve survey, 31% (aged 55 to 64) of non-retired respondents agreed that they have zero retirement savings.

The picture is horrifying because less saving or no saving for retirement can lead to a dire poverty at your older age. Carrying debt into the retirement is absolutely no-no. It can lead to a miserable retirement.

Prioritizing your debt repayment goal can help you to focus on savings for the retirement.

Thus you should avoid the possibility of living a lifestyle with debt trouble.

Because living with debt can become a habit that is hard to break. The habit can force you to live a lifestyle that you can’t afford.

Remember, it is easier to fall into the debt trap, but it is harder to get out of it. And it can be more difficult to save for the retirement if you accumulate debts persistently in your life.

Don’t delay: Prioritize your retirement savings

Saving money into a 401(k) or IRA is more important. No matter how less you are contributing. If you face difficulty in saving money, then automate it for hassle-free savings. Remember, there is a tax benefit and the money will grow in a compounding way for 30 to 40 years. So, try to save a smaller portion of your income to enjoy your retirement time.