Do you save?

To a very small degree, but if you are taking that approach, you aren't supposed to care that much about your credit score anyway because you won't be significantly using it.

It's supposed to just encourage you to keep on the debt repayment plan by allowing you to feel the results more tangibly and more quickly.

 

You can find any number of quality bond-related ETFs that return 7 percent or thereabouts. Month in and month out, the cha-ching of seeing those dividends appear in my account provides for a nice level of comfort and stability.

 

Corollary to the central premise of this thread:

How should one save?

Obviously, there is a lot out there by experts on the topic, but I'm interested to hear from some real people. I'm sure there are different philosophies here. The talk of tiny interest rates for savings accounts came up briefly. On the other hand, it seems like it would be advantageous to have some cash safety cushion from paycheck to paycheck, and some liquidity in the event of an unforeseen event, rather than just using the credit card and its high interest rate.

Thoughts?

 

Well, assuming you are saving into a 401(k), a 401(k) loan can provide emergency liquidity.

And any interest you are paying you are paying to yourself.

 

A 401k loan also carries a good amount of danger -- if you leave your workplace for any reason, you have to pay the entire amount back within 90 days. If you can't pay it with cash, they yank it out of your account, with all applicable income taxes plus a 10 percent early withdrawal penalty.

Cash should be first. Most financial advisors recommend a rainy day fund of six months of expenses. That can be tough to swing, but you should have a cushion of cash before thinking about anything else like 401k or college savings.

My preferred method, and it sounds easy, is automatic deductions. Others have touched on it, but you get used to a lower level of lifestyle. I don't think we've ever seen even 80 percent of our take-home pay actually land in our checking account because we have it set up to disappear elsewhere. And then we just work with what's in checking.