Ah, payday. The most thrilling day of the month! Of course it’s exciting, but it’s also important to be smart about how you use the funds. GOBankingRates spoke to some financial experts to find out the smart money moves for when your next paycheck comes in. With consistent efforts, you can set yourself up for future financial success.
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Here are some smart moves to consider when your next paycheck comes in.
Pay Down Debt
If you have high-interest debt like credit cards or personal loans, using your paycheck to make an extra debt payment can save you money on interest. Even an extra $100-$200 on your credit card balance or student loans can make a dent over time. Pay down your highest-interest debts first while making minimum payments on everything else.
“High-interest debt grows rapidly, so tackle it aggressively when possible,” said Andrew Lokenauth, founder of Fluent in Finance. “Even an extra $100 can save hundreds long term by reducing compound interest.”
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Boost Your Emergency Fund
Having cash reserves for unexpected expenses is crucial for financial health. Aim to have three to six months’ worth of living expenses set aside in a savings account. If your emergency fund needs a boost, allocate part of your paycheck to build it up. Even small, regular contributions add up.
“Treat your savings like your most important bill and pay it first before anything else to ensure you hit your goal each month,” said Andrea Woroch, money-saving expert at andreaworoch.com. “Focus on building an emergency fund first with three to six months of living expenses to cover unexpected bills or emergencies or a potential job loss. This will keep you out of debt.”
Increase Retirement Contributions
Many companies offer 401(k) plans with employer matching. Contribute enough to get the full match, as it’s free money. Bump up your contribution 1%-2% from each paycheck until you hit the annual max. Doing this earlier in the year lets your investments grow tax-deferred over time.
“The stock market historically offers about a 7% annual return after inflation,” said Jeff Rose, founder of Good Financial Cents. “Investing can be more profitable than leaving money in savings. Diversifying your investments helps manage risk. While diving in might seem daunting, apps like Robinhood or Acorns simplify the process. Even small, consistent investments can grow substantially over time thanks to compound interest.”
Have money you want to invest outside of retirement accounts? Options like low-cost index funds, stocks and real estate can offer potential returns. Do your research and speak to a financial advisor to create a diversified portfolio aligned with your risk tolerance and time horizon.
Set Money Aside for Large Purchases
Saving up for a down payment, car or dream vacation? Open a separate high-yield savings account and have a portion of your paycheck automatically deposited into it. Watching your savings grow can keep you motivated to reach your goal.
“Where you put your savings matters,” said Woroch. “So open a high-yield online savings account so it’s out of sight and out of mind and earns more thanks to higher interest rates. For example, Bread Savings offers a 5.15% annual percentage yield which is much higher than the average 0.26% paid on savings at traditional brick-and-mortar banks. Don’t miss out on this free money!”
Saving separately for defined goals helps build financial discipline and keeps your spending in check.
Treat Yourself (but Just a Little)
While smart money moves require discipline, don’t forget to leave a little extra in your budget for self-care. Treat yourself to a nice meal, massage or something that brings you joy. Avoid impulse buys and stick to an amount you’ve budgeted for.
“It’s essential to reward yourself occasionally,” said Rose. “Set aside a small ‘fun money’ portion. Whether it’s a meal out or a new book, enjoying your money in moderation can help avoid feelings of deprivation.”
Getting in the habit of making savvy money moves when you get paid takes consistency, but pays off substantially over time through reduced debt, increased savings and growth of retirement and investment funds. With a balanced approach, you can gain financial security for the future while still enjoying some rewards in the present.
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This article originally appeared on GOBankingRates.com: 5 Savvy Money Moves To Consider Making When You Get Your Next Paycheck
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