The only "smart thing" I am encouraging all my family and friends is this: set up an emergency fund and keep it safe. We need 3 months (better yet 6 months) of the essentials - rent, utilities, medical, car payments, gas and food. Cut back on your holiday spending and set up automatic payroll deductions into a savings account.
If you have a company that matches your retirement savings here is what I suggest
1. Save up 3 months of emergency savings. Some people say you should split your money between saving and paying off debt. Dave Ramsey suggests a different model: save $1000, then pay off debt. Do what works best for you. The most important message: HAVE A PLAN.
2. Then fund your retirement account up to the employer match (free money)
3. if you have any more after that, build your savings account up to 6 months. Or alternatively start paying off debt. Or do both. Again, have a plan and stick to it.
Speaking of credit card debt?
1. Don't use credit cards unless you can pay them all off at the end of the month (AND build an emergency fund/pay off debt/fund retirement) :
2. If you cannot pay off your credit cards at the end of each month (and build an emergency fund/pay off debt/fund retirement) : then credit cards should only be used in an emergency, not for routine purchases.
Buy insurance - if your company offers long term disability, get it. If they offer life insurance, get it (if you have family that depends on your income). These are major emergencies that can destroy families
Saving vs Retirement vs Debt
my other money posts