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I chose to pay off my bills so that I can save more in the future. It's not the way everyone should go, but do what works for you.
I can't see myself owing and trying to save at the same time. It just didn't make sense to me so we chose to pay things off big and fast and then that freed us up faster to start saving better.
Hope that helps.
I think Writerly Yours has a good point. For me though, I try to pay off my bills one by one, in the meantime saving what I can here and there. It really depends on your situation and what types of bills you are paying.
Pay off your bills, hands down. Not only is paying off your bills good so you can save later. You are also helping your credit score by getting rid of them so you can spend more later.
Depends on the bills. If you are paying a credit card off at, say, 12.99%, and your savings account only pays you .02%, that's a no-brainer. Use all you discretionary income to pay off the credit card.
If you have some other kind of debt, consider the interest rate and the savings rate the same way. We have a 6% mortgage and a 4% annunity. It worked for us.
Marie Brannon is correct, however you have to keep in mind the rate of inflation. As the value of the dollar decreases and things cost more, your debt will shrink (relatively speaking) over time anyways. For example, you take out a $50,000 loan in 1990. Twenty years later, that same 50k doesn't buy you as much stuff as it did back then. Therefore your debt is already relatively smaller than it was when you acquired it. This all depends too on the interest rates versus the rate of inflation
This also means that the cash you have on hand now is worth less in the future. A savings account may not match the rate of inflation, but it at least preserves some of the the value that might have been lost. In fact there are very few investments that match or exceed the rate of inflation.
With that said, and noting I'm not a financial adviser, I would: Pay off credit cards (the interest rate here is higher than the inflation rate) first followed by starting some savings/ emergency fund accounts. Low interest (where the interest rate is less than that of the inflation rate) debts such as cars, student loans, and homes, should be paid off after you have some money in savings.
You need to do both. Bills such as credit card bills need to be paid off and NOT run up again. But still save even as little as $5.00 if possible.
Pay off one card, then add that payment to the amount you pay on the second card and before you know it, you will have even more to put in the savings.
The reason you need to save at the same time is that once in a while (too often actually) emergencies come up--for example a flat tire that needs repair. If you have some savings, you can use it and NOT end up putting the repair on a credit card again.
You should pay off your bills first then save. It is very important to pay your bills.
check out this hub.
http://hubpages.com/hub/goodcreditspend … tsdebtfree
It is better to save money or pay off all your bills?
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Everyone's circumstances are different, but for me I chose to pay off my bills one by one. By my calculations, I hope to have everything paid off by October (if my plan works out!) and then I can concentrate on trying to save some money each month from then on.
I think it is best to save a small emergency fund so that when issues come up you do not have to borrow money again. Then go and pay off your bills one at a time until you are debt free. The Dave Ramsey method.
That depends on the relative interest rates. For high-interest debt, paying that off could be better. After all the effect of 12% on debt cannot be outweighed by 4% savings. However, remember that the compounding interest effect works better over a longer period. Therefore, it is ideal to pay off all short-term, high-interest debt as soon as possible, but don't hasten to reduce long-term debts like mortgages if you are comfortable with the monthly payments. Sometimes, deciding which to do can involve the concept of opportunity cost.
by Gous Ahmed7 years ago
If you pay off credit cards by getting a loan out, aren't you in the same position still?Maybe a loan won't have interest increase like credit cards, but what is the best way to get out of this situation for good?
by sandra rinck9 years ago
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My husband and I are looking to buy a house in the upcoming year. We have run into some trouble looking for a lender because our credit is, for lack of a better term, crap! I am looking for ideas on how to...
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Let's say your employer doesn't match anything with your 401k, and you have no issues with saving money, you don't have a million expenses... is there any point in having a 401k, iRA, or anything of that sort then?I've...
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How do you save money? Any tips?
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