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Feb
20
Should You Pay Off Debt or Invest in Savings?
Filed Under Berita Semasa, debt management, finance, investment, news
The decision to eliminate your debt or put your money into savings is a tough one. There are many variables to consider before making the best decision for your situation. So, what you will do if its happen to you?
When you’re working on a budget, a common question is whether to use your excess cash to rid yourself of debt or build up your nest egg. Financial experts agree that savings is an important part of every budget and most recommend putting 5% - 10% of your income each month into savings. Is this a good idea when you’re in debt? It’s an important decision to make. While having a savings account is a way to plan for the future, becoming debt-free is an excellent strategy for creating long-term financial health.
Interest Rates
Take a look at your savings account statements to see how much interest you’re earning. Now take a look at your creditor’s statements for the debts you have. If you’re like most people, you’re probably being charged more interest on your debts than you’re earning on your savings.
When you’re deciding between paying off debt or investing in savings, the best choice depends on the interest rate of each account. For example, if the interest rate on your debt is 13%, you would have to find a savings option with an interest rate equal to or greater than 13% to clearly make investing in savings a better choice. Don’t forget that earnings on your savings are taxable, so depending on your tax bracket, your earnings rate is even lower.
Review Your Debts
An easy way to get a big picture view of your debts is to write them down. Make a list of your debts by creditor name, amount owed, and interest rate. List them in the order of highest interest rate to lowest interest rate.
You can see more method about how to handle your debt in this 2 interesting link:
1. Debt Management
2. Debt Relief - Myth or Reality
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