Simple math suggests it’s likely better to get rid of debt before saving for retirement or adding to your emergency fund.
In general, if the interest you pay is higher than the interest you earn, you’re losing money.
By Amy Fontinelle – You may read the entire article HERE on Bankrate.com
But personal finance decisions are rarely so simple, and ditching debt first isn’t the right choice for everybody. For example, it can mean not having emergency savings to fall back on — setting you up to take on more debt when an unexpected expense hits.
Here are scenarios for when each choice – paying down debt or saving – makes more sense.
When to pay debt before saving
When you have high-interest consumer debt, paying it down first can help you solve ongoing problems with managing your money.
You’ll get a guaranteed “return” by cutting your interest payments. It’s typically more than you’d earn in the stock market and definitely more than you’d earn in a savings account.
Identify your expendable income, create a budget based on that number and include paying down debt as a significant part of the equation. Consider opening a balance transfer credit card, which can allow you to consolidate all of your credit card debt onto one low-rate card and save you money on finance…
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