There is a lack of financial and investment education in our schools, among the many things that are not taught. If you’re a high school graduate who doesn’t know much about finances except how to write a check and balance your checkbook, investing or saving for retirement is probably something you haven’t given much thought to. So here are some tips:

eliminate debt

To better eliminate debt, estimate and list what you’re spending on each debt payment and who you have it with. Commit to that amount by permanently adding it to your budget. This part of your budget, which I like to call debt settlement money, cannot change until you pay off all of your debt so this method works best.

If you have money left over, get a raise, or receive a bonus, add it to this line item. Don’t go out and ruin it. The most important factor in eliminating debt is not adding purchases you don’t really need. That’s how you got into debt. If you can’t pay for it in cash, you don’t need it.

Take a look and place each debt in one of the following categories, listed in order of priority: high-interest debt, non-tax-deductible debt, tax write-off debt, and mortgage.

High-interest debt is high-interest loans from your credit card. These must be paid first. Once this debt has been eliminated, take the money that you were paying on your cards and loans and add it to the following payments on the list to be eliminated.

Non-tax deductible debts are lines of credit, bank or car loans. Because you’re adding the money you used to pay off your cards to these payments, you’ll pay off this debt much sooner.

Again, after you pay off your loans, take the money used on your cards and loans and put it toward your student loan or other tax-deductible debt and write off this debt.

You are almost debt free. Your mortgage is the last debt you want to apply your debt settlement money to. You’re going to be making extra payments with all the money you’ve freed up by eliminating your other debt. You’re not just paying interest on your mortgage; any additional money you pay on your mortgage goes directly toward the principal. Let’s say you have a 30-year, $100,000 mortgage with an annual interest rate of 7.5%.

You have been making your regular payments for 5 years. Now she decides to send her extra $250 each month. You have reduced your mortgage by approximately 12 years. That is, 12 years earlier, you will own your house, not the bank. To find out when you will pay off your mortgage, use an online mortgage payment calculator. Excitement about how many years you will be debt free will give you the motivation to stick with this plan.

10% Rules

Don’t start investing before you eliminate your debt. First and foremost is the importance of being debt free. This is an exception, one of the oldest investment rules, is to set aside 10% of each salary and invest it. This really isn’t going to blow your monthly budget and is something that anyone can easily start with. By investing a percentage of your income, rather than a random amount, it will motivate you to be consistent. If your salary fluctuates, so will the amount of the 10% you’re saving. So go ahead and start building a retirement fund.

Be realistic

Common sense tells us that packing a lunch instead of eating out will save you money. Going to the movies with your family every Friday night is obviously going to cost you dearly. Going to the Expensive O’Latte Cafe every morning instead of making your coffee at home is a sure waste of budget. The question is why do we do these things? We have become comfortable. It’s all automatic or drive-through or my favourite, “I just had to do it.” Did someone come up to you and put a gun to your head and say, “You need to buy a newer one because that thing you’ve been driving for two years is junk.” I highly doubt that has happened.

Any car purchase, whether new or used, is not an asset or an investment. The moment you drive off the lot in your brand new because its value automatically depreciates. Newer cars have higher insurance rates. Buying new is not a wise decision. Used cars also depreciate, but the big loss felt with a new one isn’t there. The depreciation rate is much lower. Take the car off your car, get regular oil and filter changes, get a tune up, and drive it to the ground. After that, buy another used car and do the same thing. Try it out with a rewards card.

Bonuses and Raises

This is so frustrating to watch. People who get a raise or a bonus and spend it on something that could be described as silly at best drives me crazy. Invest your 2% increase by adding the amount to your 10% that you are already investing. Take your bond and put it in an emergency fund savings account. You lived with before your raise or bonus, why do you want to spend it now? Do not be stupid.

Now what?

Keep doing what you’re doing and do better if you can. The temptation to buy what you can’t afford will never go away. Over time, you’ll also refine your ability to distinguish a want from a need, helping you financially and avoiding further debt. Keep up with new investment strategies, study how they work and what their returns are, and don’t be silly.