Navigating money topics can be intimidating, investing seems out of reach for a lot of people and talking about finances can sometimes cause issues in a marriage. I’m here to tell you that money, saving and investing is more simple than you think and there are a ton of really helpful resources. I sat down with my husband, who is a financial analyst to answer some of your most common questions.
#1 How do I pay off debt?
This depends on what kind of debt were dealing with. If we’re talking about credit card debt then one option is to move your balance onto an interest free card. These usually give you 6 months of interest free payments, during these 6 months you’ll want to pay off as much as you can because you have the freedom to pay without interest. This will save you a bit of money in the long run. If this isn’t appealing to you then start by paying off the credit card with the highest interest first. If you have more than one credit card you will want to be paying the minimum balance on your other cards at this time as well. When you’ve paid off the card that holds the highest interest, move to the next card and so on and so forth.
Other kinds of debts like medical bills and car debt should also be paid off in this way as well. Start by paying off your debts with the highest interest first and work your way toward your lowest interest debts. This will save you interest payments in the long run.
#2 How do I start saving to buy a house?
Take a look at your expenses, where are you spending money? Where can you cut back? Saving for a house can seem like a daunting task but it is doable. This is a great time to establish a budget, you want to know where your money is going. Once you’ve established a budget you can highlight areas where you can cut back to achieve your home buying goals.
Here’s a great read to help get you started on budgeting!
#3 I want to start investing, where do I start?
With a 401K, the most important investment you’ll make is in your future. I don’t know about you but I don’t want to be working until I die! Talk to your workplace about 401K options, even if you’re contributing a small amount it’s something! Most employers will match a certain percentage of your contributions, it is important to take advantage of the employer match because it is free money! another great thing about investing in a 401k is that it is considered a “tax advantaged” investment account. This means that your contributions to you investment account come out of your paycheck pre-taxed, that’s more money in your pocket!
Interested in buying other stocks? Another option would be to start an IRA, this is similar to a 401K however, you are the only one contributing, this type of investment account generally has nothing to do with your employer but it has all of the tax advantages of a 401K.
** Note there is another 401K and IRA option called a ROTH, in this type of investment account you pay taxes now but when you retire and use your funds, it’s tax free. **
Still got an appetite for investing? You can open a brokerage account and buy mutual funds, individual stocks, bonds, and much more. There are lots of online brokers out there, TD Ameritrade, Fidelity, E-trade, Robinhood, etc. Keep in mind however, a brokerage account is not a “tax advantaged” account. You will be investing with “after tax” dollars and you will pay taxes on the money you make. Due to this double taxation a brokerage account would only be used (in our opinion) after you’ve maxed out your contributions to your 401k and/or IRA.
Here are some books that my husband has read and recommends on investing!
#4 How do you decide on appropriate budgets for yourselves, food, etc.?
We sat down and agreed on a budget for each category. You’ll want to start with how much money goes out every month to things like bills, car payments etc. Then you want to determine how much money you want to save each month. Next, look through your spending for the previous month; what did you spend on gas, groceries or going out? This will help to determine what each category’s budget should be set to. The equation of how much you want to save + how much needs to be spent in each category is how to successfully execute a budget. It may take a bit of trial and error to get each category just right!
If money is hard to talk about with your partner, see my post on how to have these types of talks here.
#5 How much should I have in my “nest egg”?
The typical rule of thumb is to have 3-6 months of bills and expenses saved. This will allow you to move freely within the job market, have less worry if someone loses a job (Cue Corona!) and improve the overall health and well being of your mind knowing no matter what you will have food and shelter for however long you’ve stored away money for.
#6 What is your advice on saving, spending and debt?
Saving is SO important, it allows you to have financial freedom. Take a look at your finances and your future. Where do you want to be financially in 5 or 10 years? What are you goals and how will you achieve them? I promise, you CAN have a savings account and you CAN achieve your goals.
My husband helped me reconsider my spending when he asked, “do you NEED it” when I started to change my wants to needs I found it much easier to cut back on my spending. Be objective here, set your feelings aside.
My best advice for debt is to learn about good and bad debt. Good debt would be a home (an investment where you’ll get a return). Bad debt would be credit cards and car payments. If you want a new car, save for it. Be patient, set a goal and achieve it, I did and let me tell you not having a car payment is wonderful! Get started on your nest egg, that way when a financial emergency happens you won’t be forced to put something onto a credit card.
I hope this post has been helpful! Never feel ashamed for where you are financially, we all have different stories. If you’re not happy in your current financial situation, change it! I believe in you!
As always feel free to comment below or message me privately if you have any more questions!
More Helpful Books that we recommend!