Saving & Paying Off Debt

One of the most common goals made and broken surrounds money — saving more, managing it better, and even just making more of it. But, more often than not, our best laid plans fall to the wayside because we don’t really make a serious and attainable plan to stick to in our journey. So, if you’re really serious about taking control of your finances, we have a few tips to help you get started.

If you fail to plan, you plan to fail.

What exactly are your financial goals? You should identify something or some things specifically that you want to achieve. Are you saving to buy a home? Do you want to boost your emergency fund? Is there debt hanging over your head? Whatever the reason is, identify it and begin mapping out a reasonable and attainable goal and what you need to do to get there. If you’re in significant debt, it’s more than likely unreasonable to believe you’ll pay it off in one year. But, it may not be unreasonable to set a 4 year plan. How much do you need to set aside each month to apply to your debt to pay it off in 4 years? If you want to buy a home next year, you need to consider what kind of down payment you can reasonably put together in that time frame. Maybe you put off house buying plans for a few months to give you the time to reach your down payments needs. How much do you need to save monthly to make that happen? You get the idea — don’t just say “I plan to save money this year.” Without a finish line in sight, you’ll give up before your first water break.

Set your spending plan.

“Budget” might as well be a 4-letter word akin to “diet” because it gives us a feeling of deprivation and frustration. Instead of sitting down and making a list of everything you shouldn’t spend money on, determine what you really want to spend money on. Sometimes looking at what you actually spend on cable each month (or groceries, going to the movies, etc.) can be eye opening. Look at what you currently spend and compare it to what you bring in each month. Determine what is important to you that you’re willing to spend money on and you really can do without. Is that daily $5 latte important to you? Keep it, and think about where you can shave that money off elsewhere — perhaps you can cancel the gym membership you never use. Love going to the movies? Make sure you leave that in, but perhaps you skip the $25 popcorn and drink once a month. Even just skipping the popcorn and drink ONCE per month, will save you $300 over the course of the year. Or maybe you tell yourself that you can go to the movies once a month, and then hit the Redbox for movies in the rest of the month. There are so many ways to keep doing what you love while saving money overall and without giving you that deprived feeling.

Little ones out in front!

If you are trying to tackle debt, start with your smallest debts first. For example, if you have a department store card with $700 on it and a major credit card with $2,500 — start with the smaller debt. You’ll get the smaller one paid off more quickly which will give you a sense of accomplishment and satisfaction! This is especially true for those of us who are in need of more instant gratification. Once you pay off the little debts, tackle your larger scale debts. Consider interest rates and minimum payments in determining what order to use when paying them off; but overall if you tackle debt smallest to greatest, you’ll hit milestones more regularly and keep the momentum going. And, don’t get discouraged if you’re plan is 4 or 5 years in length. Chances are you didn’t get into debt in a year and so you’re probably not going to get out of it in a year. Be patient!
Be ready for an SOS!

Many people underrate emergency funds and are without in the face of an unexpected emergency. If you’re in debt, you may not be able to contribute much on a regular basis. But, some financial experts suggest that even a jar in your kitchen where you throw your spare change can make a difference. Every few months, you can take that change and deposit it into a money market account (yields higher interest than a standard savings account). You might be surprised how much that spare change can offset unexpected costs. Once you’re debt free, or if you already are, the emergency fund should become a top priority. Most experts recommend having enough money to run your home, pay your bills, etc. for three to six months. That can take time. But, if you make it part of your spending plan and set a reasonable monthly goal, you’ll get that money tucked away for a rainy day.

Don’t forget your retirement.

Even when you’re in debt, saving for retirement is extremely important, yet often overlooked. The earlier you begin saving, even if it’s a small amount, the better off you’ll be. Consider speaking to a financial advisor or your banker even if you don’t have the money to invest at the moment. They can help you determine what you need to save for retirement and the best ways to achieve that goal. Many financial experts suggest contributing to your retirement before you consider paying for your child to go to college. Although we hate to think of our children entering into debt at a young age, we can’t not think about our financial well-being in our golden years.

Focused planning and will power are necessary when you finally resolve to take control of your finances. It will require sacrifice and many small goals along the way to your larger goal. But, in the end, your peace of mind will be worth it!


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