Personalize Your Finances

Aug 24, 09 Personalize Your Finances
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There is an age-old debate about what should be the greater priority, saving money or using it to pay down debt.  Saving, including creating a three-month emergence fund, funding 401ks, IRAs, or traditional savings accounts, will help you prepare for the future and any unforeseen occurrences.  However, debt, which includes credit card payments and loans, constantly accumulates in the form of interest.  If you choose to forego these payments, or make only the minimum payments, the interest alone will eventually eat up your savings.  How does one prioritize when faced with these competing interests?

Before you can decide which path to choose, you must have an accurate assessment of your financial situation.  Although there are generalities between various financial situations, each person’s or family’s financial situation is unique.  Thus, a budget is the primary way to ascertain your financial health.  Once the budget is complete, you will be in a position to formulate a comprehensive plan that is focused on your specific needs.

Generally, finding a way to synchronize your goals is the best approach.  Finding a harmonious method, which allows you to pay off debt in three years and contribute monthly to some form of savings, may work best for some people.  However, others may wish to aggressively pay down debt and begin saving once that money is freed.  Others may save aggressively and make a lump sum payment to their debtors.  Choosing any approach is extremely personal and should be made with your particular goals in mind.

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1 Comment

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