Should I Pay off Debt or Save?
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Money Saving Advice
Millions of people have big time credit debt. The years of easy credit and living outside of our means has caught up to some folks. A couple of friends are in situations where they have way too many credit card bills and they are struggling. Add to this a mortgage payment, utilities, food and living expenses and you’ve got a REAL PROBLEM.
The question I keep hearing is whether or not folks should start paying off their debt or start saving money. In normal times, the logical thing to do would be to pay off your debt before you start saving. The interest rates on some credit cards are just awful and can sometimes keep you from paying off the debt for years!
Unfortunately, these are NOT normal times. During a recession when jobs are being cut, and unemployment is at an all time high, you need to be smart with your money. Many people are one disaster away from losing it all. What does that mean? It means many folks with high credit card bills, mortgages payments and auto loans are living so far out of their means that one unexpected large bill could cause them to default on payments to any of the debtors. If you are stretched to the limits financially and are living paycheck to paycheck, just imagine what one hospital bill could do to your financial future.
Instead of paying off debt, do your best to save money and keep an emergency fund. The emergency fund would be to cover you if you ever lost your job or had one of these accidents. Some folks say you should have an emergency fund to pay for things for at least 6 months, other folks say 9 months. I’ve even seen one money manger claim that 16 months is better since it’s taking some folks that long to find a job. While you are accumulating your emergency fund, keep paying the minimum on your bills and don’t be late.
While I’m NOT a financial planner, nor a money expert in any way, I am striving to have at least a 9 month emergency fund. Paying off debt is nice, but in an emergency it’s good to have money sitting around waiting to be used in these troubled times.
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