SAN ANTONIO – It’s a balancing act trying to pay off debt and save for the future at the same time.
Andrea Bloome devised a system that works for her.
“My best plan is to take the money before I ever even see it, so I don’t even know it exists,” she said.
Money experts at Consumer Reports agree with her strategy, but says it’s important to strike a good balance.
“It’s difficult to tackle two financial goals at once,” said CR Money Editor Penny Wang. “If you take a two-pronged approach, you can save for retirement and pay down your debt at the same time.”
She suggests you start by taking a good, hard look at where your money is really going. Several online tools can help you track your spending, including mint.com which is free, and YNAB, short for You Need a Budget., which costs $84 a year.
Next, look for ways to free up cash. You’ll realize the biggest impact with big ticket items like housing and transportation.
But even small fixes like making your own coffee and cooking at home instead of hitting the drive-thru can add up over time.
The next step is to prioritize your debt. Wang suggests tacking high interest credit cards first and then the lower interest debts like student loans.
Setting up automatic payments as Bloome does can help make it mindless and consistent.
“It makes it much easier because you don’t have to remember each month to send in the money and you know that your debt is being paid down regularly,” Wang said.
At the same time, you need to have an emergency fund for unexpected expenses like medical or car repairs. So, slide even just a little into that rainy day fund as much as you can.
And, continue to feed a retirement plan. If you have access to a plan at work, opt in.
For people with large amounts of debt, money advisers say be patient and stay the course and remember that money management is long term.