Where there is a budget surplus you should apply those funds towards clearing the debt that you are paying the highest rates of interest on.
Where you have accounts that offer a discount for early payment you should also take advantage of those discounts by applying the budget surplus towards them.
Until you have cleared your debt you shouldn’t consider using the surplus for investing, as the money you will receive from the investment, less the tax that you will pay on that income, will be less than the amount you will save in interest payments for clearing debt.
Always look for the most benefits for each dollar spent and in almost all cases there is no better benefit than clearing debt.
Of course once you get to the stage where you have your finances in order and everything is under control budget surpluses can be better spent on investing in appreciating assets such as property, provided the property market is rising, and only where you will be able to make more money from borrowing to buy the property than you would using the money elsewhere.
That is something you can look forward to once you have managed your debt and with your ability to budget well you will be able to calculate the ratio of income to expenditure and determine whether it is a good investment that you will be able to handle comfortably before you spend your money.
You will be able to make all your decisions based on simple steps that will eliminate all the guesswork and ensure that you don’t get into financial difficulty again.
Sometimes you only need to change a few factors in your life to go from a budget deficit to a budget surplus and that is what you will be aiming to do as soon as possible. The more of the budget surplus you apply to debt the bigger the surplus will become and this affect begins to accelerate over time.