Multitasking When It Comes to Your Money
Multitasking is bad for productivity : If you’re in a meeting trying to send emails while listening to the speaker, chances are one of these tasks will suffer. You need to focus completely on one task . But when it comes to money, multitasking is essential.
“If you think you’ll start saving for a house“ once ”you have the extra money, you’ll never get it,” writes personal finance columnist Liz Weston. This is because we are all programmed to focus on our immediate needs. And there is always something urgent that requires our attention and money.
The biggest balancing factor is saving for retirement while you have debt. You have heard (and I have written) on numerous occasions that you must contribute to a retirement account prior to matching with your employer if your company offers one, no matter how much debt you owe. But why exactly when all this debt is hanging over your head?
The reason is threefold. First, because of compound interest (or interest rate). Second, because you will receive a tax credit that you will no longer receive. And thirdly, because the income that you are likely to receive, provided that your money is invested in the long term , will be higher than the interest rate on your loans. All of these factors influence each other, which means that you will actually lose a lot of money if you focus on paying off debt at the expense of your retirement savings.
It’s hard to ponder this, especially when you’re looking at five- or six-figure debt burden right after college, or, frankly, many years after college. We really cannot understand compound interest or compare profitability effectively. But it’s true.
But here’s the thing. This does not mean focusing solely on retirement and channeling whatever extra money you have into your 401 (k). You can deposit before the match (which is essentially part of your paycheck) while paying at least the minimum payments on your debts while saving $ 10 each month for another short or long term goal . It’s a balancing act that doesn’t go well with a lot of single purpose-oriented advice, but it’s the best way to get yourself in good financial shape .
Weston writes that one way to do this beyond basic automation and setting aside a tiny amount to start with is to have a single total monthly savings, but split it into different segments. So you can have $ 1,000 a month to pay for child care, loan payments, and pensions. Start small , stick to it, and when one expenditure ends or goal is reached, redirect that money to one of your other baskets. These are basic examples, so you can customize them as needed.
Personally, I keep track of my various “buckets” in my planner, which adds another layer of responsibility, makes me compete with myself, and makes sure I’m not there, passionately chewing my money . Others have suggested using paper and felt-tip pens in a shared space if it’s a goal you share with your spouse or kids , or using apps like Digit or Qapital .
You can’t do everything at once. Paying off debt, saving up for retirement, saving money for your child’s college tuition, saving enough money for a down payment on a house, opening a brokerage account are just too many goals that the average family can handle. But any budget can and should work for several goals at once.