If you have money left over after paying your bills, you might wonder whether you should save the extra funds or use them solely to tackle your debt. There’s no one-size-fits-all answer, but U.S News suggests asking a few questions to kickstart your decision.
Photo by Scott McLeod.
Writer Kimberly Palmer lists five questions you should consider:
- Do you already have an emergency savings account? If not, this should be a top priority.
- How much is your debt costing you?Crunch the numbers and figure out how much you’re paying in interest rates each year.
- How much would your savings earn you? Whether you’re investing or simply earning interest in a simple savings account, calculate how much your savings will earn you each year. Compare this number to Question 2.
- What are your expected earnings in the near future? If you’re expecting a boost in income, you might have more flexibility to pay off debt and save at the same time.
- What are your financial goals? You may need cash for your goals, but being debt-free is a plus for some goals, too. Weigh your options against those goals.
The answers to these questions will vary, and they might be complicated. But the questions are a simple enough place to start. Check out Palmer’s full post for more detail on each question.
5 Questions to Help You Decide Whether to Save or Pay Off Debt [U.S. News & World Report]
Comments
3 responses to “Ask Yourself These Questions When Deciding To Save Or Pay Off Debt”
Ask yourself this, do I have a debt for credit card, cars, interest free purchases etc etc? if the answer is yes, pay it off and don’t take out loans for TVs and hollidays in the future.
+1 : and if you have a credit card then you have emergency money – pay it off!! Then freeze it in a glass of water. then pay off any other debts with an interest rate higher than 4%.
UNLESS….. a Nigerian prince emails with a get rich quick scheme that is too good to be true. Then put all of your money into that.
haha exactly, in fact if you have an inroad to some of the lucrative nigerian prince money you should borrow as much as possible and go all in!!