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Debt or Savings? Where Should We Put Our Money Toward?

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When it comes to saving and paying off debt, consumers today seem to find themselves asking where they should put their money toward. Debt, or the future? The answer is possibly both, at the same time. It is important to realize that there needs to be a balance when it comes to paying off debt and saving. When finding that balance we need to look at our life situation, and where we have our financial goals set.

Here are some tips in order to decide how to pay off debt and save for the future, and how much to put toward each:

1. Figure out how much you have in your savings and how much you owe. This will help to set financial goals and motivate you to save.

2. Look into all the debts you owe and start a spread sheet with their balances and interest rates. It is important to become aware of which debts need the most attention and which can be paid off gradually. Also by listing your debts you can see how much is available to put toward a retirement fund.

3. Refinancing may be an option. Since mortgage and car loans have low interest rates, check to see if refinancing them is a possibility to allow you to focus your money elsewhere, such as, paying off loans or saving for the future.

4. Make a realistic budget and stick to it! Figure out how much money you can put toward debt, savings and retirement each month and if you can keep up with that amount, (ideally 20% of monthly income) then you will see positive progress.

5. Remove credit cards from your life. Credit cards are an easy and dangerous way to rack up the debt. Take them out of your wallet and give yourself a weekly allowance in cash. Also, if you have automatic payments set up each month to your credit card, cancel them.

6. You want to have at least one month's earnings in your savings. If you do not have that amount then pay the minimum on your debt each month until you have saved enough in an emergency fund, at that point you can start paying off debts in larger payments. If you can afford to get your employer to match your 401(k) then set that up for each month. Also if you have extra cash that you can put toward retirement, all while paying off your debt regularly, then set up a Roth IRA. This retirement account has incredible tax benefits where if you pay the tax contributions now you don't have to pay taxes on earnings.

7. Finally, figure out how much money you can pay toward debt. Add up all the minimums on your debt and subtract that from all the money you have allotted for financial obligations. Depending on a number of factors you will either put all that money toward your highest interest debt or a portion of it will go to retirement savings. When doing this factor in how long until you do plan to retire and the interest rates on your debt.

If you cannot seem to get a handle on your financial situation. Do not hesitate. Call an experience attorney in debt relief who will be able to help you toward a path of financially stability.

We at Timothy J. Sierra Attorney at Law would like to state that our blog posts and links, on our web page or any other social media outlet, to any other web pages are not intended for legal advice. We are not responsible for third party website information. If one is in need of legal advice please contact an attorney directly.

Work Cited:

Debt vs. Retirement: How Much To Put Toward Each (Forbes)

http://www.forbes.com/sites/laurashin/2015/02/17/debt-vs-retirement-how-much-to-put-toward-each/?utm_campaign=Forbes&utm_source=FBPAGE&utm_medium=social&utm_channel=Investing&linkId=12399655

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