Save Money While Paying off Debt
Many people struggle with debt. Whether paying off credit card bills or student loans, numerous people have to make monthly payments with interest. It can be difficult, especially if you want to start saving for your future. While you can certainly save while you are also handling your debt, you want to consider if it is truly the best course of action for you.
When to Focus Solely on Debt
Everyone should have a little bit of money in a savings account in the event of an emergency. If you have a decent amount saved, then all your attention should be given toward repaying your debt initially. This is particularly paramount if you have some high interest debt. You get a high return on investment by focusing on depleting your debt. After a while, your monthly payments will decrease, and at that point, you should start focusing your attention back on saving.
When to Pay Off Debt and Invest
Similarly, this route should only be taken if you have enough money tucked away in your savings account. There are certain circumstances where you still want to make monthly payments, but with whatever income is left over, you should invest in the stock market. On average, you should see a return on your investment between four and five percent from stocks. It will take some time before you start seeing some of this money again, but if you do not have an immediate need for cash, then it is worthwhile.
If you have an employer who agrees to match your retirement savings, then you should consider jumping on that opportunity. There are some employers who will match 100 percent of your investments, so anyone who has this option should definitely take advantage of it. You really cannot see those kinds of returns anywhere else, so continue investing money for retirement while making payments on high interest debt.
When to Pay Off Debt and Save
For people with barely any money in their savings account, they will want to set some money aside every month while continuing to make debt payments. You never know when an emergency will come up. Perhaps a car will break down, or you need to replace your home’s water heater. You cannot afford to let these expenses fall to the wayside, so you need to be able to act on them quickly.
It may seem difficult to make debt payments while also saving, but you need to do it. In the event something was to occur, such as your car needing to be fixed, you may end up with even more debt. If you are already facing severe credit card debt, then you may need to make your car payment on your credit card as well, meaning you face more payments and more interest.
Many households have some kind of debt. In fact, the average level of debt for Americans is around $15,000. While it can be tempting to spend everything on making debt payments, it is good to set aside a little for future expenses.
People Also Liked: