Tips you can use now to pay off debt and invest

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  • Between the increase in interest rates on loans and the inflation of the dollar, being in debt becomes more and more expensive.
  • However, being debt free and achieving financial independence do not have to be mutually exclusive goals.
  • Two experts offer their insights and provide practical advice for creating a roadmap to success.

Due to the sharp rise in interest rates and extremely high inflation that consumers felt at the grocery store and gas tank, a lot of credit card debt, mortgages and some student loans felt the pressure as borrowing became more expensive and daily. items cost more. And all of this is on top of the debt and overdue bills that many have racked up throughout the pandemic.

With inflation in the foreseeable future, consumers may feel that they are unable to take advantage of investment opportunities and possibly increase their savings down the road. During the pandemic, people have suffered extreme financial shortages which have made it clear that it is important to save and take control of their financial situation. It is also a goal for many to develop a financial plan that leads to self-reliance.

The good news is that the labor market has fully recovered since the early days of the pandemic and the “Great Resignation” has presented a huge opportunity for job seekers wishing to change careers and a significant increase in their salary. We reached out to a few established financial experts and asked them the same thing: how do you get back on the path to financial freedom right now? Here’s what they had to say.

Realize that your first investment in your financial journey is to get out of debt

“Make debt elimination a priority,” says Jean Chatzky, CEO and co-founder of HerMoney Media. An established financial journalist, financial editor for The Today Show, and host of the HerMoney podcast with Jean Chatzky, Jean Make Money Make Sense for over 25 years. “The stress of debt is at the top of the list of what makes us unhappy about money. So look at the money coming in and the money going out.”

In other words, the best place to start is to take a close look at your budget and really know where and how you are spending your money. While we may wish for immediate gratification, breaking down the journey into small steps will not only help us create and follow a roadmap to success, but it will make it much more manageable.

“Go back to basics, track expenses, see what can be reduced, and start paying off debt with the highest interest rate first and work your way up from there.” According to Experian, the average consumer has credit card debt and maybe even student loan debt. These are usually the biggest debt hurdles that people find themselves struggling with.

Bernadette Joy Cruz, founder of Crush Your Money Goals, advises having a plan in place to pay off that first account of debt (it could be a credit card, a student loan, a car bill , etc.), even if it is the lowest balance. Bernadette learned firsthand about getting off debt after she and her husband paid off $330,000 in debt in three years and built a net worth of $1 million in their 30s. She founded her six-figure financial education company, Crush Your Money Goals, based on that experience and the strategies she herself used.

“A lot of times, especially with lingering debt, a person can get discouraged or unmotivated or think the amount of debt is insurmountable,” Cruz told Insider, noting how much psychology plays into the journey. an individual to fight debt and achieve financial goals. “Once the first amount of debt is paid off, there is excitement about the potential to be debt free. This is when a time frame needs to be set for the whole debt be repaid.”

Don’t let any payout increase stop your momentum

As interest rates rise, credit card payments, mortgage interest rates, and even some student loan repayments increase. An average consumer may find it very difficult to save and invest when there is more money invested in paying down their debts. It can also make the finish line to being debt free feel like it’s getting further away, or even out of reach. When someone is trying to build a nest egg, start a business, or save for a house, any kind of increased debt can seem like a setback, but Cruz says you should use it as motivation.

“If you already have a repayment plan, don’t panic. Let the higher interest rate be an even bigger incentive to stick to the plan and really pay down the debt. It should be a boost to pay down the debt. faster,” Cruz explained.

If you are now making a higher payment than usual, don’t feel helpless and certainly don’t think you can’t find a way to handle it.

“It’s important not to feel like you have no power in this situation, look at your credit score, if it could be better, now is the time to make sure you pay your bills on time, on time. every time. If you have good credit, you always have leverage.”

According to Chatzky, “There are still good balance transfer cards out there. You may be able to improve your rate with a balance transfer.”

Take advantage of opportunities to consolidate

Faced with the added pressures of this fluctuating economy, investing has become a hot topic and a serious goal for many now. But is it possible to invest and repay debts at the same time? Is it time to try to do both?

“There’s definitely a bang for your buck here,” Chatzky says. “While working to pay off my debts, I would also invest in a workplace pension plan, especially if there is a match. For example, if your employer offers a 50% match, that’s a return on high investment and you didn’t. I have nothing to do.”

Sometimes just paying off the debt is its own reward. “If you pay off a credit card with a 25% interest rate, that’s a 25% return, and the more debt you pay down, the higher the return will be,” Cruz told Insider.

It is not only important to start investing, but it is also important to know where to start investing. Trying to sort through all the options can quickly become overwhelming. But instead of worrying about where to start, Cruz advises to “keep the drama out of your finances!”

“Retirement accounts are a great way to start, and you can invest in the same funds or stocks in a retirement account as you would in a brokerage account, but without the tax hit.” Chatzky agrees, “a work-based retirement plan with a match is a great place to start.”

Don’t think you have to choose between paying off your debts and investing for the future. You can do both and make significant progress towards your financial goals.

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