When you’re stuck in debt, the thought of saving money and investing some of it feels more like a pipe dream than a reality. But it’s important to have some money saved to cover unexpected expenses and life changes, even when you’re in debt. Plus, you’ll want to plan for the distant future, when you don’t have any more debt and you’re facing retirement. Though it takes serious planning and a hard look at your finances, you can learn to invest and save while still paying down debt.
Craft a Budget
When you’re in debt you need a good idea of your budget. If you’re living paycheck to paycheck, barely making those student loan or credit card payments, it’s time to take a second look at your budget. Your living expenses, like rent and utilities, are typically pretty similar from one month to the next. So are your debt payments, unless you look into a consolidation plan.
Check out your food and recreation budget for places to save. Do you really need cable, or can you switch to a cheaper service? For instance, Hulu won’t cost as much each month, but it’ll still give you access to your favorite shows. You may realize that you’re not budgeting as well as you thought you were, and you can free up a little cash each month to save. Even $10 makes a difference.
Earn Extra Cash
When your budget is already as trim as possible, it’s time to look at ways to earn extra cash. Many apps and online opportunities exist for turning your free time, your shopping, and even your junk mail into cash opportunities.
If you’ve got some room in your schedule, mystery shopping is a good, fun way to make some extra dollars. If not, try an app like iBotta, which will offer you rebates from many major grocery retailers on things you were already going to buy. Once you redeem a certain number of rebates, you can cash them out. Also check out InboxDollars, which pays you to take surveys and read e-mails, or Bing Rewards, where you can earn money just for using the search engine Bing.
Once you’ve earned some extra cash, you’re free to find investment opportunities that suit your risk tolerance and the amount of money you have available. Even savings accounts offer a bit of interest.
Use Your Employer’s 401(k) Option
An easy way to invest is to sign up for your employer’s 401(k) plan. Many employers will match the first few percent of your paycheck, which doubles the amount of money you’re investing each pay cycle. Check with your budget, and find room to part with between 3 and 5 percent of your paycheck each month. That’s typically the threshold for employer match programs.
When you’re not sure how to invest, 401(k)s are a good option. The financial planners who design 401(k) investments take into account when you’ll retire and invest your money accordingly. If you’re young, the investment is a bit more aggressive. If you’re older, the investment is safer. Plus, you don’t have to do anything to manage the investment.
Download Investment Apps
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Some apps make it easy for you to invest. For instance, Acorns links to your debit account and grabs your spare change every time you make a purchase, then invests that change into a portfolio. All you have to do to invest using your Galaxy S7 Edge from T-Mobile is download the app and keep an eye on those investments. With a fast 4G LTE network, keeping track of your Acorns account in real-time is a breeze. It’s only $1 a month while you have less than $5,000 in your account, which is far cheaper than any financial advisor.
Every time you have extra cash, it’s tempting to pay down your debts as fast as possible. Remember, though, that in order to plan for your future, you need to have some money saved and invested. It is possible to both pay down your debt and invest small amounts of money as long as you budget.