A question we get asked often is should I pay my debts or save for the future? Managing your budget while saving for the future can often times feel like a balancing act. However, with the pandemic and the stress that has come with it, many people have put their personal financial concerns first. The top two financial concerns are paying monthly bills and saving money for an emergency.
Paying down debt - you want to plan for your future, but you still have to focus on the now.
Debt can feel overwhelming. The right time to get started is right now. Make a list of everything that you owe, when those payments are due and for extra motivation, when the estimated pay-off date is. By anticipating these payments and looking towards that completion date, you can stay in control of your finances.
There is no right or wrong way to pay down your debt. Paying down your debt needs to be whatever way works for you. You can try using the debt snowball method where you pay the minimums on all your debts each month, but anything extra goes towards your smallest balance loan. Or you can try the debt avalanche method where you pay debts with the highest interest rated first, which will save you the most money in the long term. Paying off debt does take some time, just start chipping away at it today!
Saving more money – you should prioritize saving money while you are paying down debt.
Saving money can be hard but one way to make it easier is to make it automatic. Schedule regular transfers that fit with your life and go as slowly as you need – like $10 at the first of the month, every month. After a while, you will realize you can start stashing away more and more money into your savings.
If you don’t have a specific savings goal, aim to build a fund that will cover 3-6 months of expenses. Once you reach that amount, evaluate your plan. Do you want to continue building your emergency fund or shift to another savings goal? Can you afford to increase your regular contributions? If things are working well, keep it up!
Let us help – we can help you!
It can be helpful to get another set of eyes on your spending plan. Sit down with your advisor and talk through your finances. Work together to prepare a cash-flow worksheet. This will show us where your money is going and how we can make some adjustments to your budget.
We can help you plan for the future. What about other long-term savings goals you have besides a fully funded emergency fund? Do you want to help your children or grandchildren with they schooling? We can help set up education accounts. How do you feel your savings for retirement is going? We can work with you to make sure you are where you want to be when the time comes to retire.
We would love to help you with your financial goals. Give us a call today!