Are You Making Headway or Just Marking Time?

March 01, 2019

Two women and a man on an outdoor hike

There's only so much money to go around at any given time. After you’ve paid for the essentials (food, housing, monthly bills), how can you use the rest to your advantage?

You'll want to make progress toward your important long-term goals, such as retirement or the kids’ education, but that might be difficult if you’re faced with a lot of debt. How can you save for the future if you’re still paying off the past?

One step at a time

Taking on your debt in stages can help make it more manageable:

  1. Look first at any debt that you can’t deduct from your taxes, such as credit cards. This is the type of debt you’ll want to tackle first.
  2. If you owe money to more than one credit card, work on paying off those with the highest interest rates first.
  3. If your situation allows, sign up for automatic payments on your credit cards and other bills. That way, you won’t accidentally fall behind and get hit with extra interest or late charges.

Looking to the future

While you’re focusing on paying down debt, don’t leave “free money” on the table for your retirement. If your employer offers a matching contribution at work, be sure to put in at least as much as you need to qualify for the match. One of the best ways to invest in your future is to contribute to a 401(k) or other retirement plan through work.

Another way to stay ahead of your bills is to save an emergency fund of three to six months’ worth of expenses in an easily accessed account. Some people believe their credit cards will bail them out in a financial emergency – but not being able to pay them off could cost you in high interest charges and damage your credit score. And what if your credit limit isn’t high enough to cover the emergency?

Your financial advisor can partner with you to put a strategy in place that can help you pay for today while you save for tomorrow.

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