While getting out of debt and saving money remains as one of the most popular New Year’s resolutions, unfortunately it does not always work out the way people intended it to. However, with a bit of clever planning and preparation, you can easily keep your finances at a healthy state this coming year.

Nobody would board a plane without first agreeing upon a destination, but this is essentially what happens with many people’s finances. Financial planning needs to stay on target – if you don’t have a realistic goal, saving and investing will feel disorganised and meaningless. Before anything, decide on a goal that you’d like to accomplish this year. Write it down and pop it on the fridge so you’re constantly reminded of it. Next, figure out how much money you need to make it happen, followed by your course of action to obtaining it.

The Common Sense Approach

Then, there is the question of “should I repay my debts first, or put that money into savings?”. While many advisors preach firm strategies that strongly argue for one or the other (and there are great arguments for both), it ultimately depends on your personal circumstances.

High credit card interest rates can be daunting to have looming over your financial health, and savings rates are often only a fraction of what you would be paying through debt interests. So, logically you would deduce that your money is better spent paying off your high interest debts, than investing further.

Considering the maths adds up, this is a great strategy, however leaving nothing for savings, comes at a risk. If you are unexpectedly made redundant, you are quite likely to struggle if you have neglected to save. While many financial advisors might not be enthusiastic about saving before paying off debts, it may be the best course of action for you. As mentioned, your job security is something to bear in mind, and with today’s economy making obtaining credit tight, a cash reserve for those emergencies is becoming increasingly important.

Source:  ForSaleForLease