In the fast-paced world of personal finance, Marlyn Privette, a seasoned money coach with a substantial TikTok following, sheds light on a common financial misstep, the delay in saving while paying off debts. With over 287,000 followers eagerly absorbing her advice, Privette emphasizes the urgency of balancing debt management and savings to secure a prosperous financial future.
Slashing debt and saving cash simultaneously
Marlyn Privette, a respected money coach, observes a recurring misconception among her clients, that savings should only commence after debts are cleared. She emphasizes that most people don’t even have a solid strategy to get out of debt, and end up holding back investments forever. By the time they get out of debt, they don’t know how to invest, and have missed out on compound interest. Backing Privette's insights, Goldman Sachs Asset Management reveals a startling 19% dip in retirement savings linked to student loans. The 2023 annual emergency savings survey by Bankrate reinforces the idea that growing debt is detrimental to savings.
Despite the challenges of juggling debt and savings, Privette advocates for a proactive approach. She urges individuals to initiate both emergency savings and retirement investments as early as possible and says that they can and should save up while paying off debts. Her first savings goal recommendation is a $1,000 emergency fund. Tori Dunlap, financial influencer and founder of Her First $100k, echoes the sentiment, stating, emergency funds needs to be the top priority.
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Practical approach to debt management
Hazel Secco, president and founder of Align Financial Solutions, emphasizes the multifaceted challenge of navigating various types of loans, including student loans, credit card debt, and personal loans. One cost-effective strategy involves prioritizing debts with the highest interest rates, such as credit cards, auto loans, and consumer loans, while maintaining minimum payments on others. Notably, debts with lower interest rates, like student loans and mortgages, can be paid off more gradually, allowing individuals to concurrently build their retirement savings. Privette also underscores the importance of budgeting as a powerful tool in managing debt. By gaining insights into expenditure patterns, budgeting enables individuals to allocate funds strategically, facilitating debt repayment and creating room for savings and investments.
Securing long-term financial stability
Secco advises individuals to kickstart their investment journey by leveraging their 401(k) plan. For those unsure about initiating savings, contributing to a 401(k) becomes a straightforward method to chip away at financial goals. Emphasizing the significance of employer matches, Secco highlights the long-term benefits of contributing to 401(k) as a priority, especially if your employer offers a matching program. Even amid high-interest debt, Secco encourages individuals to seize the opportunity, to ensure that they don't miss out on the essentially free money provided through employer matches.
Tori Dunlap views investing as a long game, and dispels the notion that merely savings suffice. According to Dunlap, the key to building wealth lies in actively investing. She advocates for the automation of investments as a practical approach. To simplify the process, Dunlap recommends starting with a modest monthly amount, automated to coincide with paydays. In her words, "It doesn’t have to be a lot of money. All you can do is $20 a month, and if you build it over time, you are in a better financial position."
Dunlap also advises against the complexity of picking individual stocks, suggesting a focus on Exchange-Traded Funds (ETFs) or other diversified funds. In her personal investment strategy, she prioritizes Vanguard’s total stock market ETF (VTI) and its total international stock ETF (VXUS). This approach allows investors to benefit from a variety of different stocks, promoting a well-rounded and resilient investment portfolio. Privette's insight serves as a wake-up call to those delaying savings while tackling debt. By adopting a proactive approach, individuals can break free from this common pitfall. Whether through emergency funds, strategic debt repayment, or automated investments, the key is to start now.
