If you’re entering the professional world or have been in it for some time, chances are you’ve started to think about tackling a bit of your debt. By now you may have racked up student loans, credit card debt, a car loan, and even a mortgage.
The thought of getting a handle on it all can be overwhelming, but the experts at Broussard Poché, LLP have a few tips to help you get started.
- Budget: Learn this lesson early in your career and stick to it. Making a budget is essential to saving money down the road. Create a budget and practice spending on only what is necessary. Set aside the rest in savings, while making debt payments. Eventually, you’ll be able to pay more than the minimum payment.
- Save for an emergency: Start small but make it a habit. Set aside a certain percentage of each paycheck for an emergency. That could be a layoff, medical bills, car accident, or anything unexpected. A good rule is to have at least 2-6 months’ salary set aside at first. Then, as you make more income, expand that to 6-12 months’ salary.
- 401(k) or retirement: Use what your company offers, or enroll in your own retirement plan. Time is on your side here, if you start now you will be in good shape when retirement age rolls around.
- Pay off credit cards: After you’ve set yourself up with a backup plan and retirement goals, then you can get serious about paying off debt. Start with the highest interest credit cards. Stop using them altogether and focus on making more than the minimum payment. Once you’ve paid that card off, roll the payment you were making on to the next debt with the next highest interest and keep at it.
- Loans: After tackling the high-interest debt, set your sights on the low-interest debt, which usually means loans. Even if all you manage to do is lower your mortgage or car payment, it will still help you pay off those long-term loans faster.
It’s not a race, getting out of debt is a marathon. It could take years, and that’s OK. Just focus on each step along the way, and remember to plan ahead and set financial goals for yourself and your family. Getting with a financial planner is an excellent idea, especially as you plan for the future.