You'll have to prioritize spending and saving no matter how much money you make or what stage of life you're in. And when it comes to large financial goals like debt repayment or retirement savings, choosing which one to prioritize isn't always easy. What are your priorities if you have additional money? The good news is that it doesn't have to be a binary choice. It's all about finding the proper balance for you.

Examine your budget

Include line items for every cost and savings objective, including debt repayment and retirement contributions, whenever you create a budget. Even if your monthly donations are little, you're forming excellent habits. For a month or more, utilize a household budget spreadsheet to help you assess where you spend and where you may save. To create a baseline, review current invoices as well as bank and credit card data. Also, change your budget based on your spending and saving goals.

Establish an emergency fund

Make it a priority to develop an emergency savings fund if you find it difficult to handle unforeseen costs such as automobile repairs that demand an immediate outflow of dollars. Take it slowly at first, focusing on saving one month's worth of money. As you have time, add to it.

Start putting money down for your retirement

Doesn't free money sound like a terrific way to save? That's essentially what you're getting if you work for a firm that gives a matching contribution on a 401(k) or 403(b) retirement plan. If you save 5% and your company matches it, for example, you've effectively quadrupled your savings. Without any further financial fiddling on your part, $100 saved multiplies to $200 saved. Work to increase the proportion you put into that retirement fund until you've reached your employer's maximum matching contribution.

Make a debt-reduction strategy

The amount of debt you have has an impact on all of your decisions. If you're looking to purchase your first house or upgrade to a larger property, for example, having too much debt in relation to your income may make it difficult to secure a good loan rate. Prioritizing debt repayment may aid in the achievement of this objective.

That doesn't imply you should put off investing for retirement until you've paid off all your debts. Because most of us have conflicting timetables and goals, it's unreasonable to believe that you can forego retirement savings in order to pay off debt faster.

Get rid of bad debt

There is "good" debt, just as there is "bad" debt. If your only obligations are 'good' debts like a vehicle and a mortgage, you may be in a strong position to increase your retirement funds. If you can, pay more than the monthly minimum. Move on to the next loan on your list once you've paid off the debt with the highest interest rate. When are you going to finish? Consider allocating the same amount to retirement savings as you did to debt reduction.