Company match 401K
While it wouldn’t seem to help your financial situation of getting out of debt. The matching and accumulation of weath over time is worth making this a priority. In my 401K I get 100% matching up to 6% of my paycheck. So at 6% it is about $50 out of every paycheck the company matches me another $50 making it almost an instant 100% return on my investment do to fees and market instability.
Employee Stock Purchase Plan
While this isn’t as good as your 401K option it is still a great next step. My Employee Stock Purchase Plan matches 15% up to $1800 a year. That is an extra $270 a year. So $70 of my paycheck goes into the Employee Stock Purchase Plan which is $1820 a year to get full matching. Again the performance will depend on market performance in your company. The 15% and the reinvesting of dividend payments is not a bad way to go.
Next we setup an emergancy fund. I have my emergancy fund in a High Intrest Savings Account. You want at least $500 in your emergancy savings fund. This keeps you from having to use your credit card if an emergancy should arise. The ammount you will want in your emergancy fund will depend on how easy your job is to replace. Me making just above minimum wage will be able to replace my job easily so I would want 3 months of income saved up. If your job isn’t as easy to replace as mine you will want at least 6 months of income saved up. If your job is going to be difficult to replace you will want a year of income saved up. This can be saved up over time, start off with your $500 dollars and contribute to your emergency fund like you pay your bills put $50 in a month or whatever you choose to make sure it keeps growing.
Now is the time you will most likely have to start making a budget. I just told you to put away $170 a month. You have even less cash now than when you started reading this article. You have to plan for every expense and cut costs where possible. However, you should be able to come up with more than the minimum payment on top of all your expenses. A lot of people will recommend taking out a lower intrest loan to pay off your credit card. Make sure this is the best option for you. In my situation this was not the best option. My credit card applied the intrest to the card as a purchase. While yes this means I am paying intrest on intrest it also means I didn’t have to pay the intrest first and the balance second it was all one lump sum. And sitting down with a banker we figured out it would be less intrest over the long run to not take out a loan. You can also cash out your stock options when you get your debt paid down and finish it off the debt.
I personally have never had a morgage but this would be the next step in paying off your debt. It will have lower interest than your credit cards and will come after your credit cards. The more money you can put towards your Morgage each month the faster you will get it paid off.
Now that you have all your stuff paid off it is time to think about the future. While it is true I had you setup a 401K and your stock options. There are other things you can do to invest in your future. an IRA and/or a Brokerage account gives you more control of your money. And these are not for the faint of heart as you can gain a lot of money this way you can also lose a lot of money this way. Don’t play for the big win play for small gains and the dividends you will get on a pretty regular basis. If you hold a stock hoping to make $1000 you may miss the oppertunity to make $30. I never sell all of my stocks when I sell I retain some for dividend purposes. I’ve made as little as $11 on a stock sale and as much as $43. You have a long time to build your income be patient and don’t sell lower than what you paid for the stock unless you have a good reason for doing so. Wait for the stock to go back up while you sit back and collect the dividends on a stock you are stuck in.