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Advice Team Responses
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Budgeting: Saving |
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Every month I put $100 into my savings account, but then I go get it out again before the month is over. How can I really save? -Steve |
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Dear Steve,
It sounds like your heart is in the right place, but your money is not. The first step is to create a total spending plan with savings built right in. Building this plan is as easy as 1-2-3.
Step 1:Find out where your money is going now by tracking your spending.
Step 2: Determine what you want to do with your money by establishing priorities.
Step 3: Make your plan. And don’t forget to include savings in that plan. At MMI, our professional counselors highly recommend that you “pay yourself first!”
Okay, so you’re probably thinking that establishing a savings plan doesn’t sound that easy. But rest assured, it’s always worth it!
Good Luck,
The Advice Team |
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I currently have a lot of credit card debt with an average of 12 percent APR. Currently, my savings equals only about three weeks of after-tax income and earns 3.5 percent APR. However, I am not behind on my bills, and don't think that I am in danger of losing my job anytime in the near future.
My question is, if I suddenly had $1,000 to either put into savings or pay down my credit card debt, is it better financially to pay down the cards, knowing that should some unforeseen crisis come up I could re-borrow from a credit card? Or is it better to save the money in an effort to reach that 3-4 months of income savings cushion that is often recommended? -Alicia
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Alicia,
When you put money in savings, you earn about 3 percent interest. Meanwhile, you're paying out an average of 12 percent interest on your credit cards. Looking strictly at the numbers, it seems wise to pay down the debt.
However, I’m not saying that savings isn’t a priority — it is. Confused? You wouldn’t be if you had a plan. So, instead of worrying about what to do with an isolated $1,000, create that plan. Your plan should include both debt repayment and savings.
Good Luck,
The Advice Team |
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