How Do You Put Away Savings?
In this era, you just can’t rely on social security for retirement. Also, when you’re my age, you might be thinking about the future: marriage, a house, kids, kids’ college funds, vacation money, hire a hitman for the in-laws money, etc. Or maybe you’re just thinking about how to get out of debt.
Recently, I received my Economic Stimulus payment from the U.S. government. And as a single person, I qualified for the full $600. I thought “whoopee! 600 bucks to blow!” and then immediately went – “No, I’m broke nearly 1/3 of every month. I need to buckle down, form a budget, and open a money market account,” which I did. I opened a money market account at the credit union and deposited almost half my payment. I hope to try and match that each month and once my car is paid off (27 months from now) I’ll try to put my car payment into that account as well, since I won’t miss it.
I did some basic math, and not including what I’ll earn from dividends, in five years I’ll have saved up about $24k – not too bad if I can stick to it and not spend it all.
What I can’t decide is – instead of putting so much into savings, should I instead pay off my higher-interest debt and then as those are paid off start saving the money I was paying in my Money Market account?
Know some better ways to put away for another day? Leave me a comment below on how you do it.
My general rule of thumb is, if the investment/savings/money market is not making a higher interest rate than what you are paying to your debt, pay off the debt first.
For example, if money market is paying 4% but your credit card debt is at 10%, you are losing lots of money each month in interest charges by not paying off the debt first.
That’s a pretty smart idea. I’m thinking that’s what I might start doing – though I may have a more short-term savings goal in the intermediate, so I might wait to start paying extra until that’s taken care of.