money management

Setting financial priorities: Savings or Debt?

FullSizeRender

Good morning Loves and happy Hump Day.  What better way to get over the lull in the middle of the week than to get focused on our goals?!  I like to evaluate my accomplishments and set my new goals on my birthday – which just happened to be October 9th.  I reflect on what I did the past year and focus on what I want to do for the upcoming year.

My goals usually involve saving money in the short term and using it to travel as often as possible.  However in 2015 my priorities are changing just a bit.  BF and I just moved into a fantastic apartment in a great neighborhood and I’m hating my life here a lot less.  Last year I would travel at any opportunity because it let me escape from my tiny apartment and noisy neighbors.  But next year I think I’ll stay put and enjoy my new living space.

Paying off debt

We just got into $5000 debt furnishing our new apartment so I think it’s safe to say I won’t be travelling any time soon.  Of course I would like to take my time and pay off the debt over several years but that’s just not smart.  I’ve learned from past mistakes that procrastinating on debt repayment only leads to more debt and it becomes a vicious cycle – a cycle that I no longer want to be a part of.  With aggressive monthly payments, cutting eating out expenses (my biggest monthly expense besides rent) and no travel plans I expect to have the debt fully paid by May 1, 2015.

Saving for a rainy day

Many people think you shouldn’t (or can’t afford to) save at the same time as you are paying off debt.  I tend to disagree depending on your income.  If you don’t have a lot of wiggle room in your disposable income then I would say always pay off your debt before saving money – that is only if you don’t accumulate more debt in the meantime.   However I can also argue the other side of the case.  I can tell you that you should always save on a regular basis regardless of your financial obligations because you’ll always have debt whether it’s in the form of credit cards, a mortgage or student loans.

Getting rid of student loans

I will never forget the day I paid off my student loan.  I actually still have the letter – yes that’s really my student loan statement above.  I took seven years to pay off my student loans because the payments were low and the interest was tax deductible.  However now looking back at the situation I wish I took a more aggressive approach to paying off my student loans.  The truth is that $250 monthly payment (for seven years) could have been better spent, let’s say on saving for the down payment on a home.

Buying a home

Having student loan debt prevented me from doing other things and apparently I’m not the only one.  According to recent data from Credit Karma “57% of millennials who do have mortgages do not have a student loan.”  Even more shocking their data indicates “that only 8% of millennials who have student loans also have a mortgage.”  Getting into debt over education is a good cause but based on personal experience my advice is to pay it off as soon as possible so you can use that money towards other things like buying your first home.  It’s nerve racking to have two major financial commitments at the same time and if you’re like me you don’t want to gamble with your living situation.

What is your financial priority?

About the author

TK

TK is a Certified Financial Planner with over 15 years of experience in the banking industry. She started blogging in 2009 after the market crash. TK enjoys helping people plan their retirement, pay off debt, invest wisely, live on a budget and enjoy happy financial lives. You can see what she's up to on Twitter @TahnyaKristina.

Leave a Comment