Q: “For things like bonuses or tax returns where we get some money back- should we put it into savings and/or an emergency fund, or pay off debt in a chunk to get ahead on a repayment plan? Can you give a list of priorities again for the debt/savings that are recommended?”
A: The first step is to make sure you’ve stopped making new debt – otherwise you’ll find yourself in this same place next year!
I recommend Dave Ramsey’s order of operations for the first 3 baby steps:
- Baby emergency fund (so if something happens you can use cash and don’t have to use your credit card)
- Pay off all high rate unsecured consumer debt (like credit cards) while staying current on everything else
- Emergency fund
Beyond that, I’d look at the interest rate on the debt and your level of risk tolerance/comfort with the debt. If your student loan is a 4% and the market is at 7%, maybe you chuck it at the market and keep making payments on the student loan. But if the student loans keep you up at night, it can be worth chucking money at them to get it over with.
Personal finance is a balance between what makes sense mathematically and what makes sense emotionally. Take both into consideration.
Once you have the debt situation under control, you should be looking at retirement investing in your company plan as the next priority if you are not doing that already.
Are you ready to change your financial life? If so, I can help. Schedule a time to talk to me about options for working together at https://lisaduke.net/schedule
Recent Comments