Do you think saving money is better than paying your debt off? If you are in deep debt and are finding it difficult to pay off your bills saving your money to cover interest and other costs that will be occurring in the future is not a good idea.
Your debt costs you money in interest and penalties. You will be gaining a lot more benefit if you reduce and eliminate your debt and not trying to build up a surplus of funds in your account. Your focus should be cutting off the drain on your income that you use to cover the interest costs.
Saving Money or Paying off Debt?
You will always earn less money from the interest of funds invested than it will be costing you for the interest you are paying on your debts.
If you were to save money and not pay off debts it would be costing you the difference between the after-tax interest you could be earning on your investment money and the full amount of interest that you are paying on your debt.
In addition to paying interest on your debt you will be missing out on discounts for early payment of accounts. You will be losing out on this added ‘saving’ by not making payments on time.
The Right Time for Saving Money
Now that you know paying off debt is your first priority your best action is to reduce your debt where possible. Once you have cleared all your debt then you can start thinking about making savings.
Eliminate your most costly debts first, the rest of your debts second and then start saving money when all else has been taken care of. What do you think about the idea for paying off debt first and then saving money?