How To Save Money, Pay Off Your Debt and Invest

In this article, you will learn in which place to put your money once you get paid. If you manage to discipline yourself to move on to the third step and further, you will already be at a great advantage over many people who unfortunately do not reach that step.

If you follow all the steps, the chances are much higher that you will have a satisfying financial life for the rest of your life.

Keep in mind I am not a financial advisor and you have to understand there are risks involved with every financial decision you make. You need to make your own financial decision.

First Place To Put Your money is Retirement Fund

The first place to put your money is the retirement fund. This is the money that goes before you get paid. If you are living in America you can take advantage of the 401k plan which might be offered through your employer. Even if you are living outside of America your government should have something similar where you can invest with pre-tax money.

Taking out money before you even see it can have a positive effect on your savings. You won’t count on that money at all, and your savings will grow every month.

Consider putting 5 to 15% to your retirement fund.

Checking Account

When your money goes to a retirement fund, it is taxed and goes into your checking account. This is where most people get. They spend all their money from checking accounts on monthly basis without leaving savings. They don’t have anything left.

We are emotional human beings and it is hard to save. However, there are ways to prevent ourselves from doing so and set our savings to be automatic so as not to fall into such temptations.

One way we can do this is to activate a standing order. By this you can order your bank to deduct a certain amount according to the account we want. It can be a savings account, a retirement account, an emergency fund or some investment.

Spending Money on Essentials

Pay for your essentials. here I literally mean the things that allow you to live. In these things, we do not include various programs for tv, gaming computers, Xbox, etc. Here we are talking about the cost of rent, utilities, food, health,

Paying for those basic things is very important for our lives, but nothing beyond that is that important. You may want to consider what do you want in life and what do you need in life. Staff that you need are a priority. Staff that you want should be last on the priority list, after making proper savings and investments.

Emergency Fund

The next important place to put your money needs to go is an emergency fund. Everybody should have an emergency fund regardless of the money you have.

Having an emergency fund will help you relieve financial stress. And this fund is used in emergencies that never have to come. But often they happen and we are happy to have thought of them in advance.

The emergency fund should cover at least one quarterly expense. Once you calculate your expenses, you will also be able to know your minimum fund amount. Although, it varies how quickly you can find a job, how much pressure you feel due to finances, and so on.

The best way to create this fund is to just start. Set aside $ 10, $ 20, $ 50 from each salary, and in a very short period of time, you will have a good amount.

Furthermore, you want this amount of money to be liquid, secured and, easily accessible. The reason for this is that such situations happen extraordinarily and we need to have money immediately available to be able to react.

In addition, having this fund you will not have to go into debt and pay interest when such situations occur. This will save you a lot of money in the long run.

Pay of Your Debt

After you have done the previous steps and started creating savings, it is a good time to think about paying off debts, if you have them.

There are several strategies you can use to repay debts, but I will point out the two most important ones.

Debt Snowball Strategy

This is a method for those who have more open loans and have a lot of pressure from all the debts they have to pay. The main purpose of this strategy is to keep people motivated to pay off these debts.

This is achieved by first repaying the debts that have the smallest amount to be repaid regardless of the interest rate. When you tackle that debt, then you go to the other one that has the smallest amount and repays it.

Using this strategy, you will have fewer and fewer loans on your list. Therefore, you will feel less psychological stress, and you will be additionally motivated to repay debts. On contrary, when you pay 7, 8 different types of debt, it might be difficult to stick with repayment plans.

Debt Avalanche Strategy

In this strategy, instead of repaying the lowest balance debts first, you will need to tackle the highest interest rates type of debt first. You will need to make a list by interest rate, regardless of the amount of debt.

With this strategy, if you can stay disciplined, you will save more money than with a snowball strategy.

Whichever strategy you choose, you should pay the minimum payments for all the loans. You don’t want to default on them. That will hurt your credit score. As a result, you will end up paying more fees and interest.

Put Money in Saving Accounts

In this step, you want to consider saving even more money for crisis days. In addition to the money in the emergency fund that is easily available, there will be an extra supply of money here that will be ready to deploy. For example, if you lose your job, or if your income drops significantly.

This is the amount of money that should be adjusted for inflation. It should contain at least 6-12 months of expenses. In order for the amount to be quite liquid, and yet have a small yield that would compensate for inflation, consider putting this money in the online saving, CDs, money market.


This is the last step you need to consider and where your money should go. This is how you can really make that money work for you.

Investing can potentially make you rich. It is important to invest as soon as possible to take advantage of the impact of time to our advantage.

Categories you should consider when investing:

  • Stock Market
  • Bonds
  • Real Estate
  • Cryptocurrency
  • Commodities
  • Other

It is best to choose the categories in which you have some knowledge. If you don’t have one, then you can choose one and start learning about the one you like best.

It is important to diversify your investments so as not to lose money if the value of one of the categories falls, and also so as not to miss the growth of a category.


Many people ask should they pay debt first or invest. This question depends on what kind of debt you have. If you have debt that does not have a high interest rate, you can consider paying off your debt and investing at the same time.

Another thing is if you have knowledge of what could grow in the future, you might consider investing at the same time. However, this can be risky given that it is difficult to predict what will happen and the last thing you want is for your invested money to lose value and the loans to remain unpaid.

The third thing depends on your preferences, whether you can withstand the pressure to have loans that you have not yet repaid.

After going through all these steps, you should think about spending on entertainment, vacations, cars, etc. It is a matter of priority and this is why some people who earn so much do not save anything, so they do not invest.

They don’t take these steps into account and spend all the money on other things like travel and entertainment. So, follow these steps and you might find yourself in a much better financial position for the rest of your life.

If you are stuck on one of these steps and do not have enough money for the next you can always start your own business, find an extra job, or a better-paid job.

What do you think is the most important step of all these? Reply in the comments below.

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