I can start saving each month, what should I do with it?

Photo by Michael Longmire on Unsplash

Quick Answer.

The first thing you should always do is pay down any high-interest loans. If you have done that, your next priority should be to build a 6-month emergency fund and hold it in a cash account (e.g. bank savings account). The fund should cover 6-month’s worth of expenses and debt payments.

This is why.

• High-interest loans are super wasteful. High-interest loans are usually related to unsecured debt, which usually includes personal loans, credit card debt, and some medical debt. While sometimes necessary, these loans take over your available cash and it all goes to pay for interest. It’s always in your best to pay off this type of debt as soon as you can.
• Weathering the ups and downs is a high priority. You never know what’s coming (just like this crazy pandemic). It’s imperative that you are always prepared for unexpected events. 6 months’ worth of expenses is the minimum you should consider holding at all times. Remember to adjust your cushion as your expenses increase.
• If you support a family, get Life Insurance. If other people depend on your income, pay down high-interest loans, build an emergency fund and if you have a bit left get a life insurance policy. You may be able to get some insurance through work for little money and complement with your own policy.

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