Finding some extra money laying around after paying the bills or finishing a shopping spree is always a great feeling, but what should you do with it?
Although saving is essential for future purchases and a sense of financial security, paying down debt can also enhance the monetary status of an individual.
Choosing between the two should be based on three different, yet important questions:
Do you have emergency savings?
Maintaining an emergency savings account is essential. Life is full of surprises, and most of them can be considered more than expensive. Having a cushion for unexpected bills or necessary payments can be the difference between struggling and feeling fine on a daily basis. Most financial experts recommend having at least three month's worth of expenses saved for untimely occurrences.
How much debt are you really in?
Calculate how much debt you're really in. Having any sort of debt can be bad for your line of credit, as well as future financial situations, but avoiding it altogether can be next to impossible. If you're keeping up with regular payments, you may be able to stash the extra cash in your savings, but if the debt is mounting, or the interest seems to be growing each minute, the money will most likely be best spent on eliminating debt.
What are your overall financial goals?
With a set financial plan in mind, money can be saved, and debts can be paid off in the best, timely manner possible. Create a plan highlighting how much will be saved monthly, how much will be spent, and what can be tweaked when the time comes. This begins with a trusted calculator.