Should you save or pay off debt?
At one time many advisors in the financial arena were advocating that you put eliminating debt at the top of your list prior to all else. Whatever additional income that you make ought to go toward paying off high interest debt, not toward savings, they alleged.
They commented on, rather logically, that credit card rates of interest can surge as high as 30 percent when your credit is unfit, and that paying the interest on credit cards is like dropping good money down the drain month month after month.
Nonetheless, this day in time many financial guru's are shifting gears. Although it's always best to pay your credit card bills and all additional bills timely - one belated payment can cause your credit score to plummet as much as 100 points! - the unsettled economy is invigorating some fresh and unexpected advice.
The trouble? The economic system is so rickety that there are layoffs everywhere. Once-solid companies are shutting down, trouncing their workforces, cutting back the number of hours that their employees work, or giving alternatives between living with salary cuts or layoffs.
For these reasons it is more crucial than ever to have a sufficient savings buffer so that if you are laid off or let go, or your company closes, or your hours are decreased by half...you have money to address the bare necessities until you can get back on your feet.
So today, more experts are advocating that you put any extra income into savings until you've gathered enough to cover anywhere from three to nine months worth of expenses. AT THAT POINT you can get back to paying off high interest debt until it is wiped out. Others are suggesting a two pronged approach where you initially save $500-$1000, then work aggressively to pay off debt, then once the debt is eliminated accumulate enough savings to sustain three to six months of living expenses.
At one time many advisors in the financial arena were advocating that you put eliminating debt at the top of your list prior to all else. Whatever additional income that you make ought to go toward paying off high interest debt, not toward savings, they alleged.
They commented on, rather logically, that credit card rates of interest can surge as high as 30 percent when your credit is unfit, and that paying the interest on credit cards is like dropping good money down the drain month month after month.
Nonetheless, this day in time many financial guru's are shifting gears. Although it's always best to pay your credit card bills and all additional bills timely - one belated payment can cause your credit score to plummet as much as 100 points! - the unsettled economy is invigorating some fresh and unexpected advice.
The trouble? The economic system is so rickety that there are layoffs everywhere. Once-solid companies are shutting down, trouncing their workforces, cutting back the number of hours that their employees work, or giving alternatives between living with salary cuts or layoffs.
For these reasons it is more crucial than ever to have a sufficient savings buffer so that if you are laid off or let go, or your company closes, or your hours are decreased by half...you have money to address the bare necessities until you can get back on your feet.
So today, more experts are advocating that you put any extra income into savings until you've gathered enough to cover anywhere from three to nine months worth of expenses. AT THAT POINT you can get back to paying off high interest debt until it is wiped out. Others are suggesting a two pronged approach where you initially save $500-$1000, then work aggressively to pay off debt, then once the debt is eliminated accumulate enough savings to sustain three to six months of living expenses.
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