Keep your goals in balance, Vanguard

What should happen first – debt repayment or savings for the future? Is both possible?

As you might expect, there are no black-and-white answers to this question, but I encourage my clients to follow these steps:

  1. First and foremost, take advantage of the 401 (k) matches that your company offers. Do not leave free money on the table!
  2. Next, deal with any of your personal debt (such as credit card debt). Personal debt usually comes with interest rate payments, so you want to chip this amount as quickly as possible.
  3. A third (and important) step is to create an emergency fund, which consists of separate funds for any unforeseen expenses that may come up in daily life. Keeping these funds liquid and ready to use will help you avoid these costs on your credit card.
  4. Once you have created your emergency fund, turn your focus to any of your other outstanding debts, such as car payments or student .n.
  5. Once you have deleted most or all of your personal eliminated n, you want to focus on increasing your savings beyond your emergency funds. You can increase your 401 (k) contribution, or if you qualify, contribute to an IRA. Another option is to open a brokerage account, where there is more flexibility in withdrawing money.
  6. See the end of your mortgage payment. Mortgage interest rates are usually low enough that investing your money in the market can lead to higher payouts.

Are there times when I should take out a loan and leave my savings alone?

There aren’t many times when borrowing is more meaningful than using your savings, but what I can think of is Bought a new home. I see many of my clients buying a new home before selling their original home, and they ask me if they should sell their investment for a new home. My answer is no; Use mortgages at a lower rate and don’t sell your investment to cover down payments unless you need to. You can later use the cash from the sale of your original home to pay off the mortgage and increase your cash account.

If my debt is low or no interest, is it better to invest?

Some clients have asked me if debt should be resolved later in favor of investing less or no interest, and the answer actually depends on what type of debt it is. You may have a credit card that now has a lower interest rate, but if you do not pay, the interest can increase rapidly. In this situation, it is best to pay off the credit card debt as soon as possible. But if your car or mortgage payment has low interest, it may make more sense to invest your money and pay those costs in the long run.

How much liquid should I keep in my investment?

Back to emergency funds: Many of my clients are wondering how much liquid their investment should hold and how they can calculate this amount. When evaluating how much money you may need in an emergency, it is important to analyze what might happen. We define expense shocks that you have to pay for in the event, whatever the home such as home or car repairs. An income shock – such as pruning – can pack a heavy punch. I ask my clients to assess the risk of each type of shock:

  • Expenditure shock. Ask yourself the following questions: How old is my car? Am I renting or owning my home? Where do I go and where do I go? Do I often have to pay for home repairs?
  • Income push. Ask yourself the following: How easy is it to change jobs in my industry? Are my skills transferable? What would it be like to be fired? Does my wife have a fixed income?

Thinking about these situations can be stressful but allows you to assess how much money you need in an emergency.

Any tips on how to save more with or without Save?

If you are lucky enough to have no debt, save as soon as you can; It will always pay off in the long run. Review your budget frequently – especially when you retire, as your budget will change completely – and evaluate where you can reduce costs and how you can restructure your habits. Do this as often as you can and you will always know where your money is going.

Work with Vanguard Digital Advisors and use our debt calculator for all your balancing needs.


All investments are at risk, including the potential loss of money you invest.

Vanguard Digital Advisors services are provided by Vanguard Advisors, Inc. (“VAI”), a federally registered investment advisor. VAI is a partner of The Vanguard Group, Inc. (“VGI”), and Vanguard Marketing Corporation. VGI, VAI or its affiliates do not guarantee protection from profit or loss. For more information, including reasonable restrictions on your investment strategy, please review the form CRS and the Vanguard Digital Advisor brochure.

The Certified Financial Planner Board of Standards Inc. owns CFP® and Certified Financial Planner cert in the United States, which rewards individuals who successfully meet the initial and ongoing CFP Board Certification Requirements.

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