We all aspire to have financial freedom as we age. That most often requires a debt reduction and a savings strategy.
There are questions on the best route to attaining financial freedom. I posed the question in our Facebook groups, of whether you should pay your debt off first or save money. Most of the people who responded were in favor of paying the debt off first. And that is a good strategy. After all, with debt you are paying interest, you are paying more money so paying the debt off faster makes sense. Right? Yes and no.
Paying your debt off faster will save you money in interest payments. But what happens if you have an unexpected expense and don’t have funds available to pay for that expense? What are you going to do? Delay paying for the expense until you save the money? Alternatively, put the expense on a credit card? Probably the latter, right?
Now if you had savings, you would be able to take some of that money to pay for the unexpected expense. Then you would just have to work to replace the money taken from savings.
As a general guideline, it is advisable to have three to six months of savings in the bank before taking drastic action to pay down your debt. If that seems daunting, start with one month and build it up over time.
It is always easier to save if you have a fun goal in mind. It can help to split your savings into different funds. If you are a travel bug, then you might want to have one for travel. (This Rose Gold Lidded Our Adventure Fun Jar will look beautiful on your desk or table)
If you know a major purchase is going to be required soon, say for example a new computer or phone, then make that your priority and start to plan in advance.
On the other hand, if you have been paying large amounts on your debt – well over the minimum payment due – you have a bit of leeway. For one month or two, you could just pay the minimum on your debt until you get the three months together and then get back to tapping your debt down.
If it is an expense due immediately, you may have to use credit. Just don’t keep using credit and give up. Get back to your payment schedule as soon as you can.
Another strategy is to bump up your income temporarily. You might consider getting a part-time job or using your skill to provide a service. If you have not down-sized yet and have cupboards or a garage full of items you don’t use or have a closet full of quality clothes you might consider selling them on Facebook Market or one of the clothes resale sites.
It is a fact that many women are on the short end of the financial stick as they age. Don’t be ashamed if that is you as you have plenty of company. Get to be friends with your banker and look into community services that can provide support and information so that you are taking steps to find a level of financial freedom that feels good for you.