by Shane Adair, Marketing Manger
Your personal finances may not seem like an especially exciting topic - except when you want to book a vacation or need to pay an unexpected bill. Good financial management doesn't just put you in a position to book that flight and hotel or pay for a set of new tires. It also helps you remain financially stable in the weeks, months and years to come, providing peace of mind and a greater sense of security. How can you use smart savings strategies?
Not all debt is bad debt, or needs to be paid off as soon as possible at the expense of going out to dinner during the weekend or going to the movies a few times a month. With small debts and low interest rates, you should work to pay off the principal, but at a speed that works in your budget. Debts that carry high interest rates, or have such large principals that the interest is especially costly each month, should be dealt with quickly, however. America Saves suggested prioritizing any debt that has a double-digit interest rate.
There are a number of more specific strategies out there for successfully tackling debt, like the debt avalanche and snowball methods, as Forbes pointed out. The snowball involves paying the minimum balances on all debt each month, then dedicating any remaining available funds to the debt with the smallest balance. This allows you to realize some fast changes, cutting down on the total number of creditors you have to pay each month. The debt avalanche involves targeting the debt with the highest interest rate first, eliminating the most burdensome monthly payment first.
Making a choice between different debt payoff methods is as much about how you personally like to achieve goals and build momentum as it is the objective financial numbers. Making sure that you can stick with a debt reduction plan positions you to more effectively save money going forward.
CNBC recommended looking for ways to cut down on expenses that don't lead to major issues for your lifestyle. Do you have any subscriptions or recurring services you rarely use? Can you cut down on how frequently you eat out, without eliminating this luxury entirely? Could you brew a morning cup of coffee at home four days a week, and turn the visit to the local coffee shop into a weekly instead of daily treat? You don't need to unnecessarily restrict your spending, just find ways to scale back when it won't mean major changes to your lifestyle.
As you reduce debt and cut unnecessary spending, you'll find you have more money at your disposal each month. Saving those funds effectively is a vital final step in this process. Does your bank offer a high-yield savings account with a competitive interest rate, or certificates of deposit that allow you to make a safe and secure investment once you hit your savings goals?
While managing costs and cutting expenses are foundational elements of a strong savings strategy, you need to put the additional money these efforts provide to work as it starts to flow. Only using a standard savings account, or keeping your money in a checking account, means you leave the chance to earn more simply through interest on the table. Saving isn't easy - it requires hard work, dedication and a good plan - and you should reap the rewards of those actions. To learn more about the effective savings options TAB Bank has to offer, get in touch with us today!
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