TAMPA, Fla. (WFLA) —Millions of Americans have been forced to make tough financial decisions this year.
The economic recovery is very uneven, and for people with money leftover at the end of each month, the question might be, what to do with it? Spend it or save it?
Andrea Bloome devised a system that allows her to pay off her credit card bills and plan for her future at the same time.
“My best plan is to take the money before I ever even see it, so I don’t even know it exists,” says Bloome.
Money experts at Consumer Reports agree with her strategy, and say it’s important to find the right balance.
“It’s difficult to tackle two financial goals at once, but if you take a two-pronged approach, you can save for retirement and pay down your debt at the same time,” says Consumer Reports Penny Wang.
You can start by taking a good, hard look at where your money is going.
Several online tools can help you track your spending, including Mint.com, which is free and YNAB, short for You Need A Budget, which costs $84 a year.
Then, you can look for ways to free up cash. You’ll have the biggest impact with big ticket items such as housing or transportation. But small fixes, like making coffee yourself or cooking at home, can also add up over time.
Next, prioritize your debt. High interest credit cards should go first and then lower interest debt, like student loans should follow. Setting up automatic payments, like Andrea, can make things easier.
“It makes it much easier, because that way, you don’t have to remember each month to send in the money and you know that your debt is being paid down regularly,” Wang says.
At the same time, slide even a small amount into a rainy day fund, for unexpected medical bills or car repairs. And, continue to feed a retirement plan. If you have access to a plan at work, opt in! People who do have access can be 12 times more likely to save for retirement. It isn’t always easy but balancing debt against savings is the right call.
Although the strategies are good ones, it’s important to remember that people with a lot of debt, need to be patient, stay the course and remember that this needs to be a long-term plan. The younger you are when you start to save, the better off you’ll be, in the long run.