Yusra3
VIP Contributor
In order to decide whether you should pay off debt or save money, you need to first take a look at your current financial situation. This means calculating your monthly income and expenses so that you have a clear idea of where your money is going.
To calculate your monthly income, add up all the money you earn in a month from all sources, including your salary, any side hustles, interest on investments, and so on. Once you have your total monthly income figure, subtract any taxes or other deductions that are taken out before you receive your paycheck. This will give you your net monthly income.
Now, calculate your monthly expenses by adding up how much you spend in a month on essential costs like housing, food, transportation, and healthcare; debts and loan payments; and other regular bills and costs. Once you have your total monthly expenses figure, subtract any savings that you put away each month. This will give you your net monthly expenses.
Comparing your net monthly income to your net monthly expenses will give you an idea of whether you are spending more than you are bringing in each month or vice versa.
If you are spending more than you are earning each month, it may be difficult to make headway on paying off debt or saving money until you can get your spending under control. On the other hand, if you are earning more than you are spending each month, this gives you some wiggle room to either pay down debt faster or sock away some extra cash into savings.
To calculate your monthly income, add up all the money you earn in a month from all sources, including your salary, any side hustles, interest on investments, and so on. Once you have your total monthly income figure, subtract any taxes or other deductions that are taken out before you receive your paycheck. This will give you your net monthly income.
Now, calculate your monthly expenses by adding up how much you spend in a month on essential costs like housing, food, transportation, and healthcare; debts and loan payments; and other regular bills and costs. Once you have your total monthly expenses figure, subtract any savings that you put away each month. This will give you your net monthly expenses.
Comparing your net monthly income to your net monthly expenses will give you an idea of whether you are spending more than you are bringing in each month or vice versa.
If you are spending more than you are earning each month, it may be difficult to make headway on paying off debt or saving money until you can get your spending under control. On the other hand, if you are earning more than you are spending each month, this gives you some wiggle room to either pay down debt faster or sock away some extra cash into savings.