Financial Tips You Shouldn’t Take Seriously
The following is a guest post on personal finance.
With the economy progressing upward at a slow rate and many people experiencing the crunch of higher food and oil prices and stagnant wage increases, many consumers are trying to save money in any way possible. Many families have chosen to use only one car, downsize their home, or reduce extra money spent on entertainment. However, even with these monthly savings, many are still looking for additional ways to save, which leaves many to fall victim to the pitfalls of poor financial advice. Some tips to avoid so that you can have money for the future, as well as enough on hand to enjoy your life currently, include:
Paying Off Debt Before Saving
If you have credit card debt, but not a savings account, you may be headed for trouble. While paying off your debt entirely is good in theory, doing so before beginning to invest in a retirement account may leave without the funds needed to fully enjoy retirement.
Credit cards have high interest rates, which could force you to pay hundreds of additional dollars, if you only pay the minimum payment every time. This is why many consumers opt to pay debt off before investing in retirement. However, in a retirement account, your money works for you. It grows exponentially and grants you a tax break. The best bet is to pay into both each month. Give yourself a monthly budget that allows you to make above the minimum payments, and invest in your retirement account.
Quickly Pay Off Your Mortgage
While not trying to pay off your mortgage as quickly as possible may seem counter intuitive, it can actually be beneficial. Your mortgage is a low-rate, tax-deductible debt, and although paying off your mortgage more rapidly can save you thousands of dollars over the life of your loan, you may have more pressing financial priorities. Before you start making larger mortgage payments, make sure you have:
• Stayed on track with retirement savings
• Paid off higher-rate, non tax deductible debt, such as credit cards
• Adequate health, life, and disability insurance
• An emergency fund large enough to cover expenses for 3 months
Not Taking Student Loans
Not having a college degree and no student loans could actually prove to be more financially limiting than having a college degree with student loans. Those with higher education tend to make more over the course of their lifetime than those without a college degree, and although we hear the horror stories of students who pull out $100,000 for a 2 year degree, most with student loans are able to get by just fine. In fact, most students pull out $20,000 or less for a four-year degree. These loans are generally low in interest and have flexible repayment options. Don’t avoid a college degree simply because you are concerned about your financial future. Just don’t take more than you need.
On any decision concerning your finances, always seek a second opinion. Research all aspects of the decision and make a plan that works for your unique situation.