| Hi Taylor
- I just got a promotion and it looks like I'll finally be able
to pay my bills and start saving. I still have some credit card debt
and also want to start saving for retirement, so I'm wonderingwhat
should I do first?
Hi Elsa - Congrats on the new gig! Sounds like this is a big shift
for you. You can start doing a lot of exciting things with your money
soon, but let's make sure you take the right steps in the right order
to set yourself up for success.
savings. Debt relief and investing have a lot more allure,
but having a little security net in place can make all the difference
when it comes to long-term financial success. Ideally, you want
enough saved up to float you for 3-6 months if something were
to happen that kept you from working. Without an emergency fund,
an unexpected injury or car problem will drive you right back
into debt, so that's why I always urge clients to get the safety
net established before moving on to the next order of business.
2. Pay down debt. I'd like you to save for retirement while
you pay off your credit cards, but if we're choosing where the
extra $25 should go in a given month, let's hammer those credit
card balances until they're gone. Student loan debt is a little
different since it usually has a lower rate, so you can focus
on paying the minimum there while contributing as much as possible
to an IRA. With credit cards, the interest rates can be so brutal
that you really need to get those off the books to maximize your
saving potential. Don't ignore your investments while you have
debt, but make those credit card balances your primary focus.
3. Grow that wealth. Now the fun part. If your work has
a 401(k) with a good employer match (4% or higher), go ahead and
contribute there. I like IRAs better than 401(k)s but you should
take advantage of what's available to you. Also, consider opening
your own account online to buy stocks, and then start thinking
about the other purchases you want to make down the road. Saving
for a house, saving to start your own business, or investing in
a side hustle, whatever it might be. Make sure you save with purpose
instead of just socking money away in a low-interest savings account.
The more you invest now, the longer your money has to grow and
journey is a little different, but the progression of emergency savings->debt
repayment->investing is pretty tried and true. Good luck, Elsa!
Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.