How you can choose the proper direction to take

Every paycheck comes with decisions. You look at your bank statement, and then you look at your pile of bills. You start thinking about your wants versus needs and start whittling down spending options.

Perhaps you'll pay MasterCard this month and forget about funding your savings account. Maybe you have to pay some unexpected car mechanic bill and can't contribute to your kid's college fund.

How do you decide between this bill and that bill?

College vs. Retirement: Most of us want to help fund our child's college expenses. But let's face it. College isn't getting any cheaper, and it's getting progressively more difficult to come up with the monthly money needed just to pay a quarter of a college bill.

Then there's your retirement. Although most kids can find money for college thanks to scholarships, student loans or grants, there's nothing I've heard of yet that will fund your retirement.

So if you have to decide between college and your retirement fund, my money is on your retirement. Sure, it stinks that Junior has to fend for himself when that acceptance letter arrives, but it's much better than having him fret about what his elderly and broke parents are going to do to eat.

When the time comes to pay back his loans, maybe you'll be in a better financial position to help him. But put that extra money into your future first.

Forbes agrees with focusing on retirement over college: "One reason is the arcane rules affecting college financial aid, which even those earning up to $200,000 might qualify for if they have more than one child attending the priciest private colleges."

USA Today also stands in favor of your retirement. "There are a number of ways to fund a college education, such as loans, scholarships and financial aid," the paper reports. "Saving for retirement should be a bigger priority."

Bankruptcy or Pay It Off: With the economy floundering, many people are eyeing bankruptcy right now. For some, it's a viable solution. But it's definitely not for everyone. If you want to maintain your credit, bankruptcy is a no-go.

Once you've filed, you'll be forced to pay astronomical interest rates on everything. Many apartment complexes look at your credit history and won't accept you as a tenant if bankruptcy is on your records.

Additionally, many HR departments are pulling your credit when considering you as a potential employee. Bankruptcy might be a quick fix, but the long-term effects linger and can make life more difficult.

"There's a stigma against bankruptcy and for good reason," writes's LaToya Irby. "It devastates your credit and cripples your borrowing ability. Even though bankruptcy will fall off your credit report after seven to 10 years, most loan applications ask if you've ever filed. If you say 'no,' when the truth is 'yes,' you're guilty of fraud and can be prosecuted."

However, LegalZoom ( notes that despite how scary it is to claim bankruptcy, it is sometimes necessary. "With a good lawyer and the right information, filing bankruptcy could give you the financial footing you need to get a fresh start," LegalZoom states. "In other words, throwing in the towel might just be the beginning you need."

Pay Off Debt or Start Saving: We've all heard about putting aside three to six months' of money in case of emergency or job loss. But what if you have debt that you're paying off every month and can't afford another dime toward savings? Should you siphon some of that credit card debt to a savings account or just focus on paying off debt?

The answer is in the interest rates. If you're paying 10 percent interest on that debt, and your local savings bank is offering 1 percent on a savings account, you need to keep paying off that debt. The minute you're debt-free, keep paying the same amount but toward your new savings account.

"Simple math suggests it's better to get rid of debt before saving for retirement or an emergency fund," writes's Marcia Duffy. After all, if the savings rate is 1 percent, and you have credit card debt at 14 percent interest, money is better spent paying down debt quickly. But personal finance decisions are rarely so simple, and this method may not be the right choice for everybody."

Personal finance blog Free From Broke coaches people to observe the obvious. Pull out your credit card and bank statements and compare the two interest rates. "If your credit interest is at 15 percent and your savings interest is at 1.5 percent, then the obvious choice would be to pay off your credit cards,"

Free From Broke writes. "It makes sense to avoid giving your money away for free to credit card companies. The sooner you pay off your debts, the sooner you can start boosting your savings."

Having to make financial decisions every month is tough. There's only so much money to go around. But in the end, the key is to think long-term.

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