Topic c. Paying Yourself First
Topic d. Getting Out of Debt
This is one of the most misunderstood areas of a game plan. You want to get out of debt but you need to save money, so which one has priority. Easy, both. Everyone’s situation is different so there is no one blanket answer to this question. Let’s discuss a few areas of your game plan.
First, in your spending plan how much extra money are you applying to your debt already? How much extra can you commit to accelerate your debt and when will all debt be paid off.
Second, are you contributing to an employer sponsored plan and do the match any percentage of your contributions? For the most part don’t stop contributions to an employer sponsored plan especially if there is an employer match. Retirement plans need time to compound. A little bit now can mean a lot later.
Third, how much debt do you have outside of your mortgage? If you apply all extra cash to your debt how long will it take to pay it off completely? For this answer you need a money coach with financial software that will project out how long to be debt free under different assumptions.
Always remember there needs to be a balance between getting out of debt and saving money. If with maximum acceleration it will take 3, 4, 5 years or more to be debt free than you better have not only a well-funded emergency fund but also money for special occasions; birthdays, Christmas, anniversaries, etc. It doesn’t do your plan any good to have to go back to using a credit card because you have no available cash.