Priorities – What should my financial priorities be?

In this post I will go through the priorities in order to successful be financially secure.

Money Priorities

Step 1 – Debt

Pay off Debt. Credit cards / store cards are terrible. Before you consider investing in Stocks make sure you have no high interest debt. By high interest I mean anything over 1-2%. For me I have 3 debts.

  1. Car loan that is 0.9% APR for this this is not worth paying extra off and just paying off the term.
  2. Mortgage- My mortgage is 2.6% APR and whilst a lot of people will tell you to tell extra off my opinion is to NOT do this and invest that extra.
  3. Paypal Credit – Interest free payments. I have a couple of items I am paying monthly these are interest free and I budget for them monthly.

Step 2 – Emergency Fund

Make sure you have an emergency fund some will tell you it should be $1000 others between 3-6 months expenses. For me its a few months.

Step 3 – Savings

This is really the same as Step 2. I have a few buckets examples are my property tax which I save monthly, Car Tax, vet bills etc. The aim is if I had a unexpected bill I would have the funds to cover it. If I use this fund then I need to allocate funds to replace it before investing again.

Step 4 – Retirement accounts

Make sure you are making out retirement accounts. If you company gives you a max make sure you are maxing this out as its free money. Remember you can contribute $19500 to a 401k and another $6000 to a ROTH IRA yearly. (note this is for 2021 so may change in the future).

Step 5 / 6 – Investing

Assuming you have already completed steps 1-4 you are now ready for investing. My view here is to look at long term. Its a good idea to have a mix of bonds and stocks. Bonds are lower risk but also have lower returns.

A roboadvisor like betterment is a great start as they pick stocks and bonds. An alternative to a roboadvisor is to invest in ETF these are indexes where they are made up of a number of stocks. ETF’s are good as the risk is less as if one stock goes down the whole ETF wont.

Single stocks – Single stocks are the most risky.

Lastly of all – Crypto this is the highest risk its not regulated in any way. Whilst I invest in crypto I have the other steps done and I only invest what I am willing to lose. I accept that any investment in crypto might be subject large swings up and down.

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