Start with your budget.
It’s not easy to juggle basic expenses like rent, utilities, transportation, and groceries. If you are paying for these with ease — and have money left over — congrats! The next step is deciding how to spend your extra cash.
Small splurges are healthy, but too many could hinder your financial goals. If you are itching to pay off debt, invest, or both, budgeting is essential. Take the time to track exactly how much money is coming in vs. going out.
Save an emergency fund.
Before funneling cash into debt or investments, you need at least a small emergency fund. This is your stash for costly, unexpected expenses– car repairs, medical bills, and job loss are all part of life.
By seting money aside — even $1,000 or $2,000 to start — it’s less likely these curveballs will increase your debt. If you have high-interest debt, you may consider a slightly lower number — at least until your most expensive debt is gone. Aim for a long-term goal of three to six months of expenses.
Don’t skip your company’s retirement plan matches.
Before diving into a new debt payoff or investing strategy, review your company’s retirement plan. Many companies offer to match a percentage of your 401(k) or 403(b) contributions. That’s free money for you.
Skipping this perk is like giving up part of your salary so you want to be sure to lock this in while you focus on your other goals.
Pay off high-interest debt before investing.
If you are paying off debt, you’re not alone. Most Americans have it — including mortgages, student loans, credit cards, car notes, and more. But not all debt is equal.
There’s a big difference between your 5.05% federal student loan and 16.99% to 23.91% credit card debt. High-interest credit card debt costs more over time making it much more difficult to pay off. By tackling it first, you could save hundreds or even thousands of dollars in interest. Best of all, it may free up cash to add to your emergency fund or kickstart your investing plan.
Article Source & Thanks : johnhancock
