Get your debt under control before building a nest egg

It seems obvious: save as much money as early as you can. You'll benefit from compound interest and you'll build a savings habit that will serve you well when your pay goes up.

But just because it's obvious doesn't mean it's easy — or even possible.

Financial advisers know that real life — schooling, cars, homes, kids — can get in the way.

Three experts who spoke with CBC News say because people are investing in themselves early in their adult lives, the goal isn't necessarily to save early so much as getting all their ducks in a row for later in life.

One of the most obstinate ducks to manage is debt. 

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"If you're in your 20s or 30s, it would be nice to have some savings," said Preet Banerjee, author of Stop Over-Thinking Your Money!

"But if you are starting a family, getting a new house, etc., it can be pretty tough. So I don't think you should be freaking out that you haven't started aggressive savings just yet."

Though recent headlines suggest Canadians are in fact saving enough money for retirement, Banerjee says the general trend has been a decline in savings — a pattern he attributes to low interest rates and people "launching later," waiting longer to leave school, get married, have children and buy a home.

Banerjee says that means savings are delayed, too, but he stresses that it's not necessarily a bad thing, so long as people are moving in the right direction by reducing their debt.

'Just start with the basics'

"Just start with the basics, which is being able to figure out your monthly cash flow and making sure that you're running a surplus, and how to figure out your net worth," he said. "You do those two simple things … you're going to be in a fairly good situation overall."

Don't worry about investing until you're in a position to invest, he said.

If you don't have anything in savings by the time you're 40 or 45, it's hard to have a million by the time you're 65. So the response is to avoid.- Melanie Buffel, Money Coaches Canada

"Living within your means is quite a bit different than living at your means, which I think is what people naturally default to," he said.

Cherith Cayford, a financial educator at CMG Financial Education in Victoria, stressed the importance of getting your debt under control early.

"For millennials the focus should be debt reduction, debt elimination, not putting on more debt, being very focused on that level before they start planning for their retirement."

She said no 20-year-old is thinking about their golden years, anyway.

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"We've got to get real," she said. "I wouldn't even be worrying about it in my 20s. Maybe start thinking about it in your 30s, but sort of position yourself so that you are debt-free so that you can actually start accumulating wealth."

Cayford lays out a simple plan:

• Establish a specific year when you plan to be debt-free. "It can't be on the never-never plan."
• Focus on eliminating the debt with the highest interest rate, while making the minimum payments on the others.
• Continue that process until all the debts are paid off.
• Use the money with which you'd been paying down your debts to build life savings rather than "living higher."

While many people, especially in the biggest cities, won't pay off their mortgage until their 50s or 60s, it's important to have a handle on it so savings can begin.

Without a proper debt-reduction plan, you might not save a dime until your 50s.

'It's going to be very difficult'

Cayford says that's too late to save enough for retirement from nothing, and you'd likely have to rely heavily on Old Age Security and the Canada Pension Plan. That might mean living with less during retirement.

"It's going to be very difficult, because CPP was only intended to replace 25 per cent of the average industrial wage," she said. "And if you haven't been able to max out your contributions, then that's even less to try to live on."

Melanie Buffel, a money coach with Money Coaches Canada in Vancouver, said if people begin saving only at a late age, they can become discouraged.

"It frightens people," she said. "The numbers just don't work. If you don't have anything in savings by the time you're 40 or 45, it's hard to have a million by the time you're 65. So the response is to avoid. This is when it becomes really important not to jump to the big numbers, which will add to the stress, which will add to the avoidance, and then they're going to go into debt even further."

She said when people start saving in their 40s and 50s, it's important to have a clear idea of what they want their retirement to look like. What quality of life do you want? How long do you want to keep working?

Banerjee says if you can get your non-mortgage debts paid off and have a clear end in sight for a responsibly sized mortgage by your mid-40s, there's no reason to panic.

Once debts such as the mortgage are paid off, people often find themselves with $1,000 to $2,000 free monthly, he said.

"That can do a lot of work for you," he said. "That's still a relatively long period of time for people to accumulate the savings they need to retire."