But what if you’re just starting out? What if you’re looking for that first job or internship? Shouldn’t you be saving every penny for a rainy day? Can’t your debt payments wait? Isn’t it better to save now and pay off your debt later? Surely making the minimum payment each month is more than enough…right?
Should you save or pay off debt? The questions is something that every person is going to decide for him or herself at some point. The truth is that you can do both at once—you just have to figure out which one is going to take priority.
So how do you do that?
If you’re just starting out, it’s good to get into the habit of saving early. This way you can quickly build up an emergency fund (that can later become a “nest egg”) so that you don’t have to panic if something unexpected comes up.
1. Save 10% of every paycheck. Put it into savings before you even have a chance to figure out what to do with the rest of the money you’ve earned.
2. Budget more than you’ll think you have to pay. This way if, say, your electric bill comes in a little high you won’t panic. When you come in under budget, put the extra into your savings account.
At the same time, you don’t want to only pay the minimum due on each of your debts. This just stretches out your debt for a longer period of time. It’s the creditor’s way of tricking you into repaying way more than you actually spent. Depending on how much you owe, you could end up repaying two or even three times more than you spent.
So what do you do?
1. Always pay more than the minimum due. Even five or ten dollars more than the minimum due is helpful.
2. Try to pay at least the minimum due plus whatever you get charged in interest and fees each month. Check your statement to find out how much this is.
3. As one debt gets paid off, reallocate its monthly bill payment equally across the debts you have left to resolve.
4. Negotiate for lower interest rates and fees. If you have a steady repayment history, you should be able to do this fairly easily—because the creditors don’t want to lose your business!
Here’s the truth: employers check your credit report now as well as references, your background and your reputation. This is why you can’t simply ignore your debt while you work to save up for your future. At the same time, you don’t want to have to re-use up all of your credit in the event of an emergency, which is why you need to save money as well.
Don’t worry—you can do both. It just takes time and finesse
This is a guest post, however I totally agree with all of it!. For more information please check my Disclosure Statement. Our giveaways are in no way sponsored or promoted by Facebook.