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There are two important elements to consider when planning for a bright and happy tomorrow: Paying down debt and saving for the future.
Thankfully, you can do both.
Along with managing household expenses, a mortgage, monthly bills, and more, the additional cost of having children is also a part of the equation -- clothes, summer camps, and, of course, college.
But it can be done.
The secret is being flexible. When change occurs, adjust. Whether it’s a change of jobs or the various activities of children -- dance classes, music lessons, or other new interests and activities. The cost is always changing.
Take a clean sheet of paper and a bank statement that shows a list of expenditures over the last three months.
You will begin to get a picture of how much you are likely to spend going forward. Maybe it’s summer camp for the kids or a down payment on a new car. Take those into consideration as you compile your list. Don’t forget to review all your services. There could be some you’re no longer using. Cancel them. That can help you save even more money.
Add it up. Now, subtract that amount from your monthly income. That is what you have to work with to pay down your debt or build your savings.
Debt: Keep or pay it down?
An interesting choice
You decide which debt to keep and which debt to pay down. But how do you determine which one?
Start at your interest rate. Those debts with the highest interest rates, like consumer debt or credit card debt, should be paid down first. Examples of lower interest-rate debt are mortgages and some car loans.
If you have debts with double-digit interest rates, make them a priority. Your mortgage has a lower interest-rate. You would be safe to keep it where it is.
When you begin to chip away at those high-interest debts, revise your monthly budget. Now the money you are no longer using to repay debt can go directly to your savings goals.
For most parents, a must-have is an emergency fund. An emergency fund is a savings account that has enough money for six to twelve months of household expenses. This is your cushion in the event of a job loss, health emergency, or other costly surprises.
Of course, there are other saving priorities for life events. You may need a larger home or want to make upgrades to your current home as your family starts to grow. Having available cash is important. In that case, you might consider a high-interest savings account with a higher rate of return.
As time goes on, you may find yourself visiting colleges. Opening a 529 account is always a smart strategy as tuitions continue to grow, and you’ll want to be prepared. And what about you? If your company offers a 401 (k) match, it would be nice to have another stream of savings to go along with your retirement savings plan.
Planning for the future, and whatever it brings, is essential. Choosing the right savings strategy is an important decision for your family’s financial journey.
Priorities play a major part in deciding how to approach your finances. You want enough money in case of unforeseen circumstances, but you also want to pay down debt. How you accomplish those plans will depend on which savings accounts you choose to fit your goals and needs.
Understanding the interest-rate costs for each debt, and investigating the saving strategies most advantageous to your financial vision, will ensure your money will work harder for you and your family’s future.
A solid step forward would be a look into Barclays online high-yield savings account. It’s been designed to offer competitive interest rates, while giving you straightforward access to your money.
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