Should I Pay Off Debt Or Save Money?
It’s one of the most common conundrums you face when planning for your financial future: should you pay off debt or save money? The answer can be a bit complicated. It also depends greatly on your current financial situation and goals. Here’s what you should consider when deciding whether to pay off debt or save cash for the long term.
Use These Tips To Help Decide Which Comes First
You Want To Start With An Emergency Fund
If you’re looking to start paying down your debt so you can live debt-free, it’s vital to make a budget first. Part of creating a budget is also creating an emergency fund to go along with your general savings account. It’s tempting to tackle the debt first, but it will be even more difficult to do so if you don’t have an emergency fund.
Even a small amount of emergency savings will help you if an unexpected emergency arises, such as a hospital bill, job loss, or major car repair. Without savings, you’ll likely rely on a credit card to cover such emergencies and your debt will increase thanks to credit cards with high-interest rates.
In the beginning, you may have to scale back your debt pay-down plan to build up savings first. But once you hit a goal of savings that cover at least three to six months’ worth of income, you can keep savings in tandem with debt repayment. This should help you decide which one to start with.
Choose A Debt Repayment Strategy
When deciding whether to pay off debt or save cash, consider the type of debt repayment plan that would work best for you. There are a lot of options here depending on the amount you owe and the type of debt. For example, if you have student loans, you may try to pursue loan forgiveness or deferment.
You’re more likely to deal with credit card debt, as those come with the highest interest rate. Two main debt repayment plans to consider are paying the highest debt amount first and going down from there (the avalanche method) or starting with the lowest debt amount and going up from there (the snowball method).
Keep in mind that using the avalanche method makes it more difficult to save money at the same time, while there’s a bit more leeway if you choose to go with the snowball method of paying off debt since the debt pay downs are for smaller amounts first. Choose whichever one works best for your personal situation and goals.
The Key Is Finding A Balance
It’s a tough decision to pay off debt or save. Sometimes the answer is to find the right balance that will benefit yourself and your family the most. That balance is most often found by paying down debt in a way that also lets you save. Remember, whichever you choose, any little bit helps in the long run. Find a balance that matches both your current needs and your future financial goals.
Pay Off Debt Or Save? There Are Pros For Each
Striking this balance is preferred since there are big pros tied to paying off debt as well as saving. Pros of paying off your debt quickly include improving your credit score, reducing the overall interest you have to pay over time, being able to get closer to meeting other financial goals, and removing the emotional burden that often accompanies heavy debt.
Making savings a priority also has big benefits. If you begin saving early, you can likely buffer your overall savings thanks to compounding interest. Through saving you can start working toward your financial goals right away and not wait for the debt to be paid off, as well as help cover emergencies quickly, so you won’t accumulate more debt.
Get Payday Loans For Real Emergencies
When you are facing a financial emergency, paying down debt and saving money gets even more complicated. The best course of action is likely to cover the emergency expense quickly so you can get back to achieving your financial goals. Payday loans are an option for help.
Payday loans are short-term loans designed to help if you need a little assistance between paychecks. At Mississippi Title Loans, Inc., you may qualify for payday loans of up to $400. We give you the option to begin the payday loan process online. On our homepage, complete the payday loans inquiry form to begin.
A representative from a Mississippi store location near you will then call you and guide you through the rest of the process. The best part is, if you qualify and agree to the terms of the payday loan, you get the cash you need the same day or the following business day at the latest.
Decide Whether To Pay Off Debt Or Save Money Today
Figuring out whether to pay off debt or save money can be tricky. Use this guide to figure out which one is the right decision for you. And whether you decide to pay off debt or save money, it’s not uncommon to still need financial assistance when you face a financial emergency. Fill out the online form on our website for payday loans right now.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.