Like many others, you might have various debts to settle. Mortgage, credit cards, student loans the list goes on. On the other hand, you also want to build your finance for the future which includes retirements plan and saving.
Choosing which one to prioritize is very hard and stressful task especially when you do not know what is the best move to make. But actually, it is not an impossible thing to do. You might want to check these tips we have here.
Learn How to Settle Debts While Building Your Financial Future
- Pay Debt’s Minimum Payments
This is the most important thing that you need to do. You need to always pay for the debt’s minimum payments. You also need to pay them on time to make sure that your credit will always be on good standing.
If you miss any payment then it can create late fees as well as compounding charge. Those things can make your debts increased and be uncontrolled so you must avoid it at all cost.
- Create cash buffer
After all of the minimum obligations are met then you need to create cash buffer. Start by saving the same amount as your rent for a month or at least $1,000. This saving will give you some time to breath just in case something happens.
It is not an emergency fun but it can help to cover your bills when you are low. When you experience some bumps along the way, you will be able to pay your bill in time and would not miss it. Remember missing your payment will have very bad impact to your finance.
- Match the full amount from employer
Once you have done previous things, now it is time to work on your future. One way that you can do is to have enough contribution to your 401(k) plan or any other retirement plants that your workplace has.
You need to match the full amount that you get from the employer to get full benefits from it. Of course, you also need to see how long you can actually get benefits from the plan. Think if you will stay on that job until you can get those benefits or not.
- Pay your credit cards
Once you have great balance, now you can start to eliminate your debts little by little. Start by paying your credit card by pay it more than the minimum. This is important so you will not be stuck with interest that is too high for too long.
If you have more than one credit card to settle then you need to find out which one that has highest rate. Then you need to focus on that card first before focusing on the 2nd. When you have paid everything then you need to pay your card balance fully each month to avoid any other debt build up.
- Creating emergency saving
Next thing that you need to do is to create emergency saving. You need to save enough funds to cover 3 months to 6 months of your essential expenses. It is better to have them in hand in cash just so it can be access easily.
- Paying debt vs investing
You can do this step when you have cover all of your financial need. Now you can try to see which one you should prioritize the most. Of course, there are various consideration that you should take. You need to compare whether paying more will give you more advantage than investing the money.
Once you make sure that your finance is strong by doing all of the above steps then you can try to pursue other goals that you have. View More…