You know you have to repay the debt. You also need to save for emergencies, education, a home, and retirement.
There's only so much money for everyone, however. If you try to pay 100% of your debt before you start recording, it might take too much time.
If you try to put money into savings at low rates today, at the same time you pay the high interest rate credit cards, you'll never go ahead, either. So what is the best plan
Knowledge of these six things may help you decide how to prioritize your savings and debt repayment plans:
Your emergency fund comes first
you can get out of debt without putting money in savings, but you probably will not stay there.
If you make just enough money to pay your bills, and you have nothing set aside for garden-variety calamities in life, you are almost certain to borrow the next time the car dies or you need dental care. What other choice do you have?
Try to keep the salary a month into a savings account or other place open, so you know you can cover minor emergencies when you need to.
Whenever you have to dip into the emergency fund, save like crazy to repay you. Tweet this
Once you get used to having an emergency fund, you'll wonder how you sleep at night without it. Work on building your funds to the value of living expenses of three or six months.
Your credit cards are not an emergency fund
Credit cards charge way too much interest in making good replacement fund emergency. In addition, your credit limit could be fired at any time. So what would you do?
Moreover, when you hit tough financial times, the last thing you want to do is to go further into debt.
Credit cards are payment of a fine tools, but they are willing ugly long term. Tweet this
Some debt is OK; other toxic debt
It would be wonderful if we could live without debt, but that is almost impossible these days.
If you have tried to save enough money to buy a house, house prices would probably rise faster than you can get money.
mortgage debt is debt "OK".
It is generally at a low interest rate, and if you can withstand a refinancing, balance usually goes down over time.
mortgage debt is even tax deductible for most people.
other loans are somewhat OK.
student loans, if you can not avoid them and you plan wisely, should more than repay you with a lifetime of higher earnings and a satisfying work life.
Interest rates are low.
auto loans plans, furniture and carpets of payment, credit card debt, and overdue bills should all be paid as quickly as possible in most situations.
If they have a high rate of interest, they can be toxic to your financial life. If it is difficult to pay your bills, you may have to add living expenses in your debt for your payments.
The cycle continues.
When you think debt repayment versus investment, focus on the repayment of toxic debt first. Tweet this
Make a list of your debts and prioritize the order you want to pay.
The most important ingredient of a savings plan is time
If you do not have a pension, savings or investment accounts, consider opening a today ' hui.
If you start saving in a plane (k) in your 20s or 30s 401, it is not so hard to be ready for retirement when the time comes.
If you wait until you're 50, it will be difficult.
it's not just what you have to save more money in a short time
Thanks to compound returns -. earning interest or other income on the statements of previous years - you will have a lot more money if you invest the same amount of money on your work life if you stash immediately towards the end.
This is why you need to open an account and start saving, even if you can not save much.
Before you repay all your debts, pay yourself first. You can not afford to wait. Tweet this
Never allow matching contributions from the employer on the table
If you have an employer corresponding plan to work, make sure to enjoy.
Suppose your employer matches 50% of your contributions to your (k) plan 401, up to a limit. (Some employers match 100%.)
By all means, make your contributions to the plan and take your share of correspondence, even if you still have consumer debt.
It's just too good a deal to pass.
must get into the habit of saving, even as you get out of debt
The question is not if you have to pay off debt or start saving first.
you can not do everything at once, but you can work on your most important savings and debt reduction targets if the two Prioritize carefully.
toward the debt, pay credit cards and unpaid bills.
Pay your house is large, but it is much less of a priority than getting rid of all consumer debts once and for all.
In terms of savings, to create an emergency fund as soon as possible, if you do not have it.
Take advantage of matching employer funds. Open financial accounts and start putting something in them every month, even if it is only $ 20.
Start learning to invest while you pay your debts.
So when your debts are gone, you are ready to get serious about working toward all your financial goals in life.
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