Saving for the Future While Paying Off Debt

Once the real paychecks start, paying off your debt as fast as you can may seem like the best way to get ahead. But that game plan could leave your finances at a permanent disadvantage down the road.

Saving for later and paying off the past doesn't have to be an either/or proposition. Doing both just takes some planning.

So how can you do it?

  • Make sure that you are contributing enough to your 401(k) or other retirement plan you have through work to get the employer match.
  • Try to pay off nondeductible debt (like credit cards) as fast as you can while still contributing to your retirement savings plans to get the match. 
  • Consider paying your deductible debt (like student loans or a mortgage) as scheduled ‒ based on the length of the loan.

Why not put all your "extra" money toward paying off debt? Though it's a personal decision, starting early with investing could benefit you in the long run. Consider this: Investing the exact same amount each month, you could end up with over $300,000 more if you start investing at age 30 instead of 35.

cost-of-waiting-graph

Source: Edward Jones. Assumes investing $550 per month and a 7% average hypothetical annual return. This example doesn't include taxes, fees and commissions, which would reduce the return. Figures rounded to the nearest $5,000.

This example is for illustrative purposes only and does not reflect the performance of a specific investment.

However you decide to tackle your finances, it makes sense to learn more about how investing can get you to where you want to be.

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