I am a recent college graduate and finally landed a job in my career field. I’m being offered benefits, life insurance, IRA’s and other, what my friends call, “work perks”. I am single and have bills to pay, student debt, and life to live – I want to have money to spend but save at the same time. How do I know what is best for me to buy into at work and what I need to avoid? Please help!
Career Woman Wendy
Dear Career Woman Wendy,
You can start planning for your future while living for now. It all begins with sitting down and figuring out what your income and expenses are. Then look at your debt and what the interest rates are on that debt. Any debt that is charging a high rate, you should put on a schedule to pay off as quickly as possible. This may cause short term pain, but will give you much more freedom to make choices about your spending once that is done. Once your high interest debt is paid off, then look at the remaining debt and make the decision about which ones to tackle to pay off or pay off on the schedule that has been set. Those decisions may be better made with the help of a financial planner, but basically, think about the tradeoff between the interest you are paying and what you could earn on the funds or use the funds for. Because it is a tradeoff. Every dollar spent in interest paid is a dollar you can’t spend for something you want to do or buy. Sometimes it’s worth it, and sometimes it’s not.
Then start looking at saving up for an emergency fund so you don’t have to use credit when something unexpected happens. Recently, my washer died and I had to buy a new one. I was offered 18 months credit same as cash and I’ll take that all day long. I can make a small payment every month and pay no interest. That’s a no brainer in my book. So the money in my emergency account can continue to earn interest. Then begin to look at your 401(k) and other saving options. All the while putting money aside for current trips and expenditures. Think about putting all your monthly earned income on the dining room table and picking up each dollar and choosing which bucket to place it in. When you’re proactive about it, the dollars don’t seep out of your checking account without you knowing where they went. I’m not saying it’s easy, but there is power in making the choices.