Budgets Are Sexy (2026 Guide)

There is a smarter way to approach budgets sexy, and it starts with knowing a few key details. This guide covers them, along with tips you can apply immediately.

Key Takeaways

• (Guest post by Laura Adams) People frequently ask me about whether they should focus on investing money for the future or on paying down their debt.
• Just about everyone has some debt, like a student loan, car loan, or a lingering credit card balance, that they genuinely wish to pay down.
• But you also wish to save or invest your spare cash for your retirement.
• Worth noting: that may seem like a tough decision, but the information in this post will provide you a clear direction for what to do.

Tips That Make a Difference

If you’re fortunate enough to have some excess cash at the end of the month, maybe you’ve also wondered about the best method to apply it. Follow These Financial Priorities Whenever you have any added money in your pocket, be sure to take care of these financial priorities, in this order, before you do anything else: Pay down any delinquent debts that could threaten your well-being or credit score, such as an overdue tax bill or legal judgment.

Accumulate a financial safety net. If you don’t have at least three to six month’s worth of your living expenses saved up in an accessible emergency fund, that’s the next place your added money should go.

Common Mistakes to Avoid

More importantly, pay down high-interest debt. If you have credit cards, lines of credit, or auto loans, with double-digit interest rates, attack those financial burdens next.

Determine the Highest Return on Your Money If you’ve accomplished the above and still have excess money left over each month, you’re in a excellent position. Maybe you have an added $100 and are struggling with whether to invest it in your Roth IRA or to apply it to pay down your mortgage, for instance.

Is Budgets Sexy Worth It?

Remember that the answer to the dilemma is straightforward: Determine which choice is more profitable for you. To do that, you have to figure out your after-tax return for each choice.

Get a Guaranteed Return When you pay off a debt early, you’re actually earning a guaranteed interest rate that you’d otherwise have to pay. So if you pay off a credit card that charges you 18% interest, you’re making an 18% return.

Where the Real Savings Hide

As a rule, but in the case of some debts that come with a tax deduction, like mortgages, home equity lines of credit (HELOCs), and student loans, you can cut costs on taxes, which lowers the effective interest rate that you genuinely pay. So those types of debt are typically the ones that you should pay off last since they cost you the least.

The amount of tax savings you get on a tax deductible loan depends on your income tax rate and any maximum deduction limit that may apply. Example of a Mortgage’s After-Tax Return Here’s a quick example: Let’s say you have an interest-only mortgage of $200,000 with a 6% annual interest rate.

A Closer Look at Budgets Sexy

In short, that means you pay $12,000 per year in interest ($200,000 x 0.06) which is fully tax deductible. If your effective tax rate is 25%, you would save $3,000 a year in taxes.

When you take that fantastic tax savings into account, your mortgage only costs you 4.5% ($9,000 / $200,000) in interest. Example of an Investment’s After-Tax Return Now, let’s switch gears and talk about your other choice that I mentioned in my example, investing an added $100 it in your Roth IRA.

What to Know About Budgets Sexy

Worth noting: let’s say you’re considering a mutual fund that has an average annual return of 8%, including fund fees. With a Roth you have to pay taxes upfront, but then get to make qualified withdrawals during retirement completely tax-free.

If your effective tax rate is 25%, then your after-tax return on the investment nets down to 6% (0.08 x 0.75). Compare Your Financial Choices Since a 6% after-tax return on a mutual fund investment would be greater than your after-tax savings of 4.5% on your mortgage, opting to invest your $100 spare money each month is a better apply for it.

How Budgets Sexy Really Works

More importantly, the investment yields 6% whereas paying down the mortgage would only yield you 4.5%. Though, taking the investment route involves some level of risk and isn’t a guaranteed return.

Therefore the best choice for you depends on your tolerance for risk and your long-term financial goals. If you still feel conflicted about the issue, one solution is to do both.

Getting the Most From Budgets Sexy

Remember that you could send $50 to pay down your mortgage each month and $50 to build wealth in the greater-yielding mutual fund investment. , , , , , - Laura Adams is the author of “Money Girl’s 10 Steps to a Debt Free Life,” and she also hosts the Money Girl weekly podcast over at Quick and Dirty Pointers. For more money pointers, advice, news, and resources, you can find her on Facebook and Twitter. (Photo by Daquella manera) (Visited 17 times, 1 visits right now) Get blog posts automatically emailed to you!

Frequently Asked Questions

How can I save money on budgets sexy?

Compare prices across a few retailers, look for active coupon codes, and time bigger buys around sales events. Follow These Financial Priorities Whenever you have any added money in your pocket, be sure to take care of these financial priorities, in this order, before you do anything else: Pay down any delinquent debts that could....

Is it worth shopping around for budgets sexy?

Usually yes. Accumulate a financial safety net.

What should I check before buying?

Read the terms, confirm any code still works, and factor in shipping or returns. If you don’t have at least three to six month’s worth of your living expenses saved up in an accessible emergency fund, that’s the next place your added money should go.

Smart Ways to Save More on Budgets Sexy

• Leave items in your cart for a day; some stores send a follow up discount.
• Pair cashback with a coupon so you save twice on the same order.
• Stack a coupon code with an existing sale whenever the store allows it.
• Sign up for the retailer newsletter to catch first time and seasonal discounts.
• Compare the final price including shipping, not just the headline number.

Final Thoughts

The bottom line on budgets sexy: a little research goes a long way. Compare your options, watch for seasonal offers, and never pay full price when a better deal is a click away.

Originally published at budgetsaresexy.com.