When we launched our “How To Have The Best Financial Year Of Your Life In 2014” live on-line event this year, I asked the question: “What is your top financial goal for 2014?”
The top response BY FAR was “I want to reduce/eliminate debt.”
It is a noble goal that will help create financial margin and reduce stress. However, many people make the mistake of skipping straight to debt reduction without first saving some money in an emergency fund.
This is a big mistake.
You see, we want to kill debt. We’re frustrated and angry and want to say goodbye to our long-time friend, Sallie Mae Student Loans, the banks, credit card companies, and stores. We want the debt to be G-O-N-E!
And we run right past a more important step – saving money.
Think about it. If you do not save money and begin to attack your debt with any and all extra money such as tax refunds, bonuses, and money freed up by better budgeting, you will begin to see your debt go down.
Then your car will break down.
How will you pay for it? Since you skipped the “saving money” step, you will have to use credit to pay for it.
This is demoralizing, and it causes many people to give up on their debt freedom march saying, “I just can’t seem to get ahead.”
Choose to save money first. I recommend $2,500 as a good start. Once all of the non-house, non-business debt is gone, build the savings to 3 months of expenses.
I’ll finish by sharing this: I’ve yet to meet anyone who told me, “We’ve just saved too much money. I regret it.”
Never. Met. That. Person.