Saving and paying off debt
by Wealth Know How in Budgeting
It very easy to incur debt and always challenging to save, it requires real discipline to work out a plan that strikes the right balance and delivers the best outcomes. We discuss a way forward in helping to understand your financial position and work out an approach that suits your priorities
- sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
Published on 18 Jul 14
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It very easy to incur debt and always challenging to save, it requires real discipline to work out a plan that strikes the right balance and delivers the best outcomes. We discuss a way forward in helping to understand your financial position and work out an approach that suits your priorities
Sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
-
Venezuela tension heats up
Duration 03:16
-
Aussie dollar surprises market
Duration 03:10
-
Markets climb as investors watch US healthcare bill
Duration 02:31
Usually, if you’re not saving enough, you’re making this worse by building up too much debt.
Turning this around, into growing savings and reduced debt, takes discipline. But it’s how you build your financial independence and set your family up for the future.
The first thing you need to do is to go through your budget and work out what your financial priorities are – always with the aim that money coming in exceeds money going out. You use this surplus amount to save, or reduce your debt.
Of course you will have your living expenses, and these will be priority items in your budget. You’ll need to draw money out of your income to meet these expenses. But after that, you need the discipline to carve out an amount every week, or fortnight, or month, and religiously bank this amount in a separate savings account – or pay it straight off your credit card, within the interest-free period, which keeps the credit card as a handy tool and not a debt trap.
Debt is OK when you’re making it work for you, when it generates income; it allows you to buy a home or gives you a tax deduction such as an investment loan. That’s efficient debt. But if you have debt in the form of a credit card or a personal loan, it’s not efficient debt.
The best approach is to have a system where money is saved or used to reduce debt before you have a chance to spend it, for example, by diverting it into a savings account or a credit card payment straight out of your pay.
Making a regular savings deposit is similar to the way a mortgage repayment comes directly out of your account, and you know that this will happen every month.
Again, there are many apps and tools available on the web to help that you stick to a budget and a savings and debt plan.