Between your monthly bills, student loans, and paying off debt you may already be spread thin financially—but you still need to create a cash cushion, save for retirement, and save for things like vacation or a down payment on a house or car. Here are a few quick tips.
Pay Off Your Debt ASAP
The faster you pay off debt the less you pay in long-term interest, and the more you can put in savings. Paying even $20 or $50 a month extra on a credit card, or one extra car payment a year can drastically slash interest.
Employer Retirement Plans
If your employer matches the percentage (typically between 1 and 5 percent) of what you put into your 401K each month, invest at least what they match. Otherwise, you are letting go of free money. And yes, even if you are in your 20s you should be investing in your retirement plan—the sooner you start the more wealth you will build.
Create A Cash Cushion
Suze Orman suggests a 12 month cash cushion. This might sound like a lot but with fluctuating job markets, 12 months will give you peace of mind if you have a financial emergency. This cash cushion can be a bare-bones minimum so it may not need to be a full year’s salary. It should also be separate from your vacation fund, house down payment fund, or other savings funds. If your cash cushion is light, as you pay off your credit cards keep them open—as a backup if an emergency arises. As easy as it is to forget, credit cards should only be used for emergencies.
Here’s to your financial health!