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Ask Paul: I’m digging myself out of debt but what comes next?

Christine entered into a debt agreement following some bad decisions. She asks Paul Clitheroe for advice on saving or investing.

Christine: I earn $60,000 a year and last year I put myself under a debt agreement.

I felt it was my last option due to the circumstances at home. I’ve made bad decisions in the past and am now straightening things out in my life.

I have decided to put aside money to buy shares as I feel it is a good start in preparing for my future.

I am turning 30 this year and I feel stuck. I need your insight into whether it is a good move to start investing in shares or save my money.

Paul: A debt agreement is not a pleasant experience, Christine, but good on you for taking responsibility.

You have two really big things going for you.

First, you have said you made bad decisions. This is really important. People who say it was all someone else’s fault learn nothing.

Second, you earn a good salary and you are only 30. So by recognising your mistakes, taking responsibility for them and then knuckling down and starting to put money aside is music to my ears.

Frankly, the key issue for me is that you are saving. Shares are a great idea if you plan on holding them for the longer term, say at least seven years.

If, however, you think you might want to save a deposit for a property, then building cash in a high-interest account is a pretty good plan. If unsure, shares are fine.

They may go up or down in the short to medium term but you can always access your money if your plans change.

Written by Paul Clitheroe

Paul Clitheroe

Paul Clitheroe AM is a respected financial adviser and Money’s chairman and chief commentator. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books which have sold more than 600,000 copies. Email Paul your question (must be 150 words or less).

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