If you have a certain amount of money, what will you use it for? Invest to get a return or to pay off debt first? This is an important decision to make because although having saving account is a way to plan for the future, debt free is a very effective strategy to achieve a stable long-term financial position.

Remember that saving money, investing and paying off debt are long-term things related to your lifestyle and other financial commitments. Often, you have to make changes to the way of life to achieve a balance between the three things and it is not easy. However, if you want to have a stable financial position, finding a balance between saving money and paying off your debts is the key. If possible, settle those debts first and then only think about starting to invest. Only then will you be confident to invest, because if your investment is not successful, you won’t be chased by the bank. In fact, Islam also demands that we pay off our debt immediately, if we are able and when we have paid the debt, it won’t be too stressful.

The first step is to build an emergency fund first. An emergency fund generally refers to money saved for use when you really need it. This should be your primary savings goal. After that, only then can you save to buy a house, children’s education and retirement. It doesn’t matter whether you are new to saving or already have a lot of savings, having a sufficient amount of money in an emergency fund will give you peace of mind because you already have adequate protection. An emergency fund is important because if you face problems, such as losing your job , struck by illness, car breakdown and so on, you don’t have to go into debt. With this, your financial situation is not too affected even if you face difficulties.

Having saved up in an emergency fund, it’s time to turn your attention to the core of your problem, which is DEBT. Due to the limited salary, you need to use some or all of the money previously saved in an emergency fund to pay off debt. After clearing important debts, you can return to paying attention to efforts to increase savings such as investing. The investment product chosen depends on your investment objectives and risk tolerance. Finally, always keep an eye on investments to make sure they are aligned with your goals. Debt and investments can have a common purpose if you can combine the two and identify similar end objectives. Borrow to buy stocks or invest in a mutual fund will give the same effect, namely generate income. When you are debt free, you can save more and have more capital for future investments