Money can be a source of stress for many people. When you have competing options for your hard-earned dollars, like paying off loans, saving for retirement and lifestyle spending, it can be difficult to manage and know you’re on the right path. This can prove especially tough for those in the earlier stages of wealth accumulation, so I’ll walk you through some basic principles.
Where Cash Goes: Debt
First, let’s talk about debt. Not all debt is bad debt. For instance, a mortgage on your home helps you build equity and – assuming you have a reasonable rate – it’s often best to simply pay it off as scheduled. If you have high interest debt (like credit card debt), it’s a good idea to pay that off as quickly as possible. Other types of debt, like student debt, can be more complex and it is important to craft a plan, taking advantage of any programs or relief available.
Where Cash Goes: Savings
When it comes to saving, you have many options. After you’ve built your emergency fund, you can start building your investment portfolio. It is important to take advantage of any matching opportunities and employer retirement plans, like a 401k. Then max out your other accounts and contributions and Roths, 401ks, and other tax efficient accounts. Financial security and flexibility is the ultimate goal, so the more you save, the better off you will be.
Lastly, your lifestyle plays a big role in how you are able to save and pay down debt, so it is important to have a good handle on your expenses and budget.
At Wealth Dimensions, we guide clients and provide tools on budgeting and cash flow analysis, so that you can be intentional with your money. This brings clarity that you are on the right path and building towards your future. Please contact any of our advisors if you would like to hear more about our process.
For informational purposes only. Not intended as investment advice or a recommendation of any particular security or strategy. Past performance is not indicative of future results. Information prepared from third-party sources is believed to be reliable though its accuracy is not guaranteed. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. For more information about Wealth Dimensions, including our Form ADV Part 2A Brochure, please visit https://adviserinfo.sec.gov or contact us at 513-554-6000. Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.