Should You Use Your Savings To Pay Down Debt?

Should You Use Your Savings To Pay Down Debt?
I don't know about you, but that money in my savings account feels pretty precious. Especially if you've ever worried about being able to pay the bills or if you've been stressed about money before, that savings account feels like bumpers at the bowling alley.

It's hard to part with that money!

But, if you've accumulated some debt, your money in your savings could be working for you.

Here's a few questions to ask yourself before you tap into your hard earned savings account:

1. How much money is in your savings account?
It used to be that $1000 would be a good solid base for an emergency savings. I'm not sure if you've had an "emergency" lately, but $1000 isn't going to cut it. 

We had to replace the tires on my car and it came in close to that! 

Now I recommend $3000 to my clients as a good base and there are a few reasons.

Number 1: $3000 will cover most typical emergencies. Not ALL, but you can't possibly plan for ALL emergencies. 

Number 2: a savings account is not the only place you should have money to pull from.

First and foremost - if you haven't put your emergency savings money in a High Yield Savings account, do that now! You're missing out on extra moula. It's not much these days (returns of about 0.5%) but it's better than a typical savings account at 0.04% wouldn't you say?

 2. How much debt do you have?
If you have a small amount of debt, it's usually much easier to part with some savings knowing that you can probably replenish your account quickly. The faster you can make that debt go away, the more your money can work for you!

But if you have a mountain of debt - the kind of debt that just weighs on you and makes you feel like you can't get out from under it, there's a strategy for tapping into your savings.

I believe it's always worth putting some money towards your debt so that the interest doesn't keep growing. Have you ever looked at your mortgage or student loans? The amount you took out is never the amount you will have paid in full by the end of the term. Interest accrues quickly.

What worked for me and what has worked for my clients is a split of 45/45/10. After you have a $3000 base, take the rest and split it up. Forty-five percent can go towards paying a debt, forty-five percent to investments and ten percent to fun. 

Because trust me, if you aren't allowed to have any fun while you're paying down debt, you won't stick with it!
Doing it this way, consistently every month creates new habits and quick wins so you'll want to keep going.

Now of course, everyone's situation is different - if your job is on the out or you know you're about to lose your health insurance, you have to evaluate what kind of cash you need access to in the next few months.

So before you go allocating those funds to debt, take a look at what you might be up against.

3. Don't wait to invest!
Most people I talk to believe they have to wait until they've paid down their debt to invest. But here's why investing while you pay down debt is important:

You can still access some of your investment contributions if you need extra money in an emergency.

Investment service M1 Financing actually allows you to borrow against any contributions you've made to your investments. They loan that money to you at 2% interest and BAM look at that extra money you have to pull from if you need more than $3000 for an emergency.

Now of course that 2% is costing you more than if you had say $15,000 sitting in a high yield savings account, but it's an emergency right? Something that doesn't typically happen, and in this case, you have access to money if you need it. Then you're really just paying yourself back with a little bit of interest.

You may also be able to borrow your contributions you've made to your taxable brokerage (read, not your retirement account) without penalty so this can serve as a type of emergency fund as well if you've been investing at all. *Pay attention to capital gain rules in your state and per your specific account type.

So you might as well put your money to work!

Have you caught my drift yet? No matter where you are, if you haven't started investing, START! It's the best thing you'll ever do.

At the end of the day, what I want for you is for you to feel like you know exactly what's going on with your finances. This is about decreasing your stress and empowering you to take the reigns on your money because no one else is going to care as much as you do about your finances. No matter where you are now, you have the opportunity to change that and for your finances to look completely different in the next 365 days.

If you're not sure where to start, grab my free Beginner's Guide to Investing download and join our free community where women are slaying debt, making finances fun & sexy and designing a life they truly love.

xoxo,
Gwen

How To Fix Your Attitude Towards Money

How To Fix Your Attitude Towards Money

It is easy for people to get defensive or feel ashamed when they are struggling with their finances. But here's the thing, where you are is just where you are, not WHO you are. Starting with this mindset will set you up for success!

The first step to creating healthy finances is to get clear on what your financial goals are. Start by writing down where you want to be in 1, 5 and 10 years time. Having clear goals will help you create even clearer action steps.

Most people don't like this next step, but in order to go where you want to go, you have to know where you've been. Take a look at your monthly spending: how much money do you have leftover each month after expenses? Is there leftover? Make it a game to see how much you can increase that leftover by removing any unnecessary spending, canceling subscriptions, and cutting out useless expenses.

Here's the best part - you get to give that money a plan! Tell your money where to go. The 3 areas your leftover money will go towards are: debt, investments and fun. Using the snowball effect, start by paying down your smallest debts. Once you've paid off a debt, take that money and add it onto the minimum payment of the next debt.

The key here is consistency. Make it fun, celebrate your progress and create your new belief about money.

If you aren't sure exactly where to start, let's set up a time to chat! e-mail me Guinevere@roilhighness.com with subject line CHAT ME and let's see how we can help you change your money mindset today.

xoxo,
Gwen

What they're not telling you about student loans....

What they're not telling you about student loans....
Raise your hand if you have student loans! Raise both hands if they're killing you LOL.

Last month I was able to reduce my student loans from $675 a month to $5 a month. Yes you read that right, $5 a month. 

How? I sat through a presentation from one of the leading experts on student loans and learned SO much.

You already know how passionate I am about getting out of debt and helping other's do the same. It's the reason I wrote the Ditch Your Debt in 30 Days course!

Here's the thing, any kind of debt sucks but student loans suck a heck of a lot more.

I'm a part of many debt payoff focused groups as well as financial independence groups and I've seen so many arguments around student loans.

There's the argument that states we should have known the costs when we took out the loans so we're not allowed to complain about what they're costing us now.

Let's talk about that one for a minute. I don't know about you but at 18 years old I didn't even know what I wanted to do for the rest of my life.  I had never taken out a loan before then.

Checking account - yup.
Savings account - yup.
Loans - nope.

Deciding on a major, a school and taking out loans feels like a whirlwind. I actually don't remember much of that process at all!

The lack of education in our schools around real life finances is a disgrace. But that's a conversation for another day. I honestly believe that student loan companies know what they're doing when it comes to "helping" students take out their first loans for school.

If they were really concerned with us knowing everything about the student loan process, they would make it easily accessible. And of course, we could have asked the questions, but I'm willing to bet most of us didn't even know the questions TO ask. At least I didn't.

So anyway, yes I take full responsibility for the amount of loans that I took out, but also student loans is a business and businesses make money when students take loans out. The longer the loans and the more money is taken out, the more money the student loan companies make.

So, do I believe these companies have our best interests at heart? Absolutely not. I've learned a lot since then.

Let's look at some facts (that blew my mind!):

1. 1.7 trillion dollars are owed in student loans by about 45 million Americans. That's about 1 in 4 working adults between 25 and 65 years old. And this number is set to double by the year 2028.

2. Student loan debt is the second biggest debt to mortgage loan debt. And the #1 reasons people are denied mortgages is directly related to student loan debt.

3. Tuition is growing about 8% every year while wages have remained pretty stagnant since the early 2000's

4. For every $1 you owe in student loans, thats a loss of $10 in retirement assets or savings. With the average student loan debt around $40,000, that's a loss of $400,000 in retirement.

People are afraid to start families, they're waiting longer to purchase homes, they're losing sleep over their monthly payments and feel that there's no way out. 

That's why I'm here, to help you reduce your monthly payment and work with you to save a ton of money on your loans so you can put it towards retirement and assets.

Trust me, I thought I had explored all avenues when it came to lowering my payments. I was happily surprised to learn that I had missed this one. I'd be happy to hop on a call and see if we can save you some money with your student loans as well. Click through to schedule a 15 minute Zoom call and answer a few questions with me.

xoxo,
Gwen