The Balancing Act of Debt and Savings
You want a new car or perhaps to own your own home, but you’re knee deep in debt. It’s a common scenario that faces many Americans.
Wanting to save and wanting to pay down your debt can seem like opposite side of a coin. But there’s hope in striking a balance. The team at Broussard Poché, LLP has a few tips to help you find the center of saving and paying down debt.
Overdue and High-Interest Debts
- If you’ve fallen behind on payments, or have a few very high-interest payments, focus on those first. It’s better to rid yourself of these debts so you can avoid additional interest, penalties or a lower credit score.
- If you’re regularly making only the minimum monthly payment on loans or if you have high-interest loans or credit card balances, dedicate any money you have to paying these debts down right away.
- You never know what’s just around the corner. An injury could sideline you at work or a layoff could impact your family for months. It’s best to be prepared. Even if you still have existing debt that’s not overdue or subject to a high-interest rate, start a rainy-day fund.
- The goal should be to put aside enough money to cover at least three to six months’ worth of your expenses. If that sounds like a lot, remember that the most important step is simply to start saving. Even if it’s just a little each week, stick with it and don’t dip into this account for non-emergency spending.
Focus the Future
- Your future should always be top of mind. That means putting aside some money for retirement. If you’re eligible for an employer’s retirement savings plan that will match your contributions, sign up today. The match is a free bonus that will help ensure a more secure retirement later.
- If you’re keeping up with debt payments and lowering outstanding balances, then it makes sense to add retirement savings to your budget.
Know When to Ask for Help
- It’s not always easy to prioritize financial needs, you may need some professional help and that’s OK. Talk to your financial advisor about options that will help you pay down for debt faster, save for retirement, and work towards your goals.