Rianka R. Dorsainvil, CFP®
When you’re paying down debt, it can feel like all your financial goals are on hold. It’s possible to save for the future and pay down debt, which can give you a feeling of financial security. For example, having an emergency fund means you don’t need to resort to higher-interest debt if you run into a financial emergency. Still, trying to save for the future and pay down debt can be a challenging balancing act.
“That’s part of the art of financial planning,” says Brittney Castro, CFP. “How do you split money between debt payments and saving for the future?” One key element: Getting specific about your goals. Whether it’s buying a house, saving for retirement or not living paycheck to paycheck, the more specific you are, the more you can create a plan that works for your life. Here are five ways to maximize your money now — and later.
Pay down debt and save
“Focus on two or three goals during the year, because then, it’s not overwhelming,” says Castro. But it’s important to have more than one goal, or else you can get stuck in a pattern of what Castro calls “isolated financial planning.” Castro explains that this occurs when you put off future financial goals, like saving, until your debt is paid down. Instead, come up with goals that simultaneously let you save and pay down debt.
If you’re not sure where to begin, start by creating an emergency fund. Once that’s funded, you can set your next financial priorities.
Build a budget
Dorsainvil and Castro agree: Everyone needs a budget. Seeing how much you spend each month can help you see opportunities to save and pay down debt. Not sure where to begin? Try using an app or even writing expenses in real-time. Guesstimating can make it challenging to evaluate your spending.