Is It Better To Pay Off Debt Or Save Money
Again, many schools of thought on this. My personal approach save up a $1,000 emergency fund first. ;
This way you can cover the majority of unexpected expenses and stay out of the paycheck-to-paycheck cycle. After the first $1,000 I would put the bulk of extra money toward debt repayment. Then, once the debt is paid off, Id resume aggressively saving for my financial goals.;
Take the first step by opening up a high-yield so you have a place to stash your savings that earns as much as it possibly can.
Utilize Debt Repayment Strategies
It helps to have a plan for how you’re going to tackle your debt. Two popular approaches are the debt avalanche and debt snowball strategies. Although these methods are typically used to pay off high-interest credit cards, you can apply them to all types of debt.
Debt avalanche: With the debt avalanche plan, you make the minimum monthly payments on all of your debts except the one with the highest interest. You put as much as you can afford each month to that high-interest debt until it’s paid off. Then, once that debt is cleared, you move to the second-highest interest debt and repeat the process until all of your debt is repaid.
Debt snowball: Under the debt snowball approach, you make the minimum monthly payments on all of your accounts except the one with the smallest balance. You prioritize the smallest debt, paying as much each month as you can, until it’s paid off. After you’ve paid down that account, you apply the same approach to the second-smallest balance.
As you can see, the debt avalanche and debt snowball methods are similar philosophically, but differ in practice. The avalanche method will likely save you more money over the snowball method, but the snowball method may be easier to stick to since it provides faster and more frequent gratification. It really comes down to your preference and which strategy fits your timeline best. In either case, you’ll make faster progress and save more on interest than simply paying your monthly minimums on all accounts.
Break Free Of Your Finances
Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.
When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. Its the freedom to be obtain and do what you truly need to make your way through everyday life.
Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.
Though it seems hard to believe, it is really very simple to get financial freedom.
To do so, you simply need to make sure that your assets exceed your liabilities. In other words, youll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.
While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.
Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.
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Consequences Of Credit Card Debt
Some of the industrys highest interest rates are connected to credit card debt. Not only will you owe much more than you borrowed, but youll also lose credibility in the process. Here are a few consequences of credit card debt:;
One of the reasons people take on a credit card is because they want cash fast. Initially, having access to money might feel great. Only later youll start feeling the burden of the high interest rates. Although there are exceptions with interest-free loans or 0% APR solutions, these cards come with certain limits and conditions.;
Youll always end up paying more than youve borrowed since interest amounts add up.
Hurts Your Credit Score
Looking at the FICO credit score calculator30% of the calculations are based on the amount of debt you have. Your credit score will be lower when you have multiple credit card accounts. It will hurt your credit score even more if you avoid monthly payments or regularly pay late.;
Affects Your Future Income
The more credit card debt you have, the bigger your monthly installments will be. Having to pay off credit card debt with interest every month will result in less available money for other expenses. Cutting costs when it comes to holidays and special events is one bad consequence of having to pay credit card debt. It also means that you will be further away from reaching your future financial goals.;
Wont Be Able to Apply for Future Mortgage Loans
Why You Should Prioritize Paying Off Your Debt Quickly
If you plan on one day owning a home, retiring early, or taking that big trip youve always dreamed of, youll need to get your personal finances in orderand that often starts with tackling debt.
You may be thinking, Those plans are a long way off. Whats the rush? One of the issues is that debt can lower your credit score, making you less likely to qualify for loans in the futurelike a mortgage. Another issue is high interest rates. If you have several high-interest credit cards that youre not paying the full balance on each month, those fees can quickly multiply. And the longer you keep those debts open, the more youll end up paying in interest over time. Both of these are excellent reasons to start taking steps to become debt-free.
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What Is The Quickest Way To Pay Off A Credit Card
We already mentioned the quickest way to pay off credit card debt is the debt snowball method. And this is how you do it:
Step 1:;List your credit card debt from smallest to largest. Pay minimum payments on everything but the smallest one.
Step 2:;Use all the extra money youve got from those earlier tips and attack the smallest credit card debt with a vengeance. Once that debt is gone, take what you were paying on it and apply it to the second-smallest debt .
Step 3:;Once that credit card debt is gone, take what you were paying on it and apply it to the next-smallest debt. The more you pay off, the more your freed-up money grows and gets thrown onto the next debtlike a snowball rolling downhill. Its unstoppable. Youre unstoppable. That credit card debt doesnt stand a chance.
Keep repeating those steps until the debt is completely gone. And dont forget to;close your credit card accounts;after you pay them off. Then go ahead and dance like nobodys watching, even if they are. You did it!
Okayso all of this takes effort, sacrifice, focus and time. What if you could speed it up even more? Learn the plan to do just that in Financial Peace Universityavailable only in Ramsey+. The average household pays off $5,300 in the first 90 days of working this plan. Imagine your life 90 days from now with at least $5,300 of your credit card debt gone. Forever. Check it out in a Ramsey+ free trial!
Dont. Give. Up.
About the author
Set Up An Emergency Fund
Its one of the biggest money questions do I save or pay off debt?; Ive been there: you pay off all your debt and work hard to do so, and then your car breaks down. Or your dog needs a stitch in his paw, or you break up with your long-term boyfriend and need cash to move out.
This is why it helps to have an emergency fund. Even a small one can go a long way to helping people stay out of credit card debt. Even though experts recommend 3-6 months pay in an account, I suggest starting small. I did this with my $1000 in 45 Day challenge and recommend it to all. Its ideal to have $1,000 saved up before you start paying off debt, but after works too.
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Using A Credit Card For Everyday Items
Another trap people often fall into is using their credit cards for regular, everyday purchases. Unless you follow a monthly budget and can easily pay your credit card balance in full each month, charging non-discretionary expenses on a credit card can be dangerous. By keeping common;purchases like groceries and utility bills off of your;credit card balance, you’ll take;a major step in getting spending under control.
Consider that a $3 gallon of milk bought;with a credit card will eventually;turn into a $30 gallon;if you don’t pay off the balance at the end of each;month. There’s no reason to incur interest charges on necessary items that you should buy;directly;with monthly income with cash, check or debit card.
Pay Your Balance In Full Every Month
While it can be tempting to pay just the minimum on your credit card each month, make a point of paying as much as you can preferably the full balance. Any credit card balance carried over to the next month will start accruing interest and that costs you more every day.
Carrying a balance on your credit cards also impacts your credit utilization rate on your credit report which can decrease your credit score if it exceeds a certain percentage of your available credit. A decreased credit score may result in higher APRs on loans or other credit cards you take out in the future.
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Look Into Debt Consolidation
Rolling multiple debts into one payment ideally with a lower interest rate through debt consolidation can make your debt easier to manage and less expensive overall. The less you have to pay in interest, the more money you can put toward reducing the underlying debt.
A 0% interest balance transfer credit card or a debt consolidation loan are two solid options for debt consolidation. Note that youll likely need a good credit score to qualify. Also, each lender sets its own requirements, and credit score may be just one piece of the puzzle.
When Debt Relief Is Right For You
If youre past the point of consolidating and need immediate relief, you might consider some of these options. Debt relief is typically best for delinquent debtsso, if youve missed payments and cant seem to get a hold on your finances.
Now, your individual situation will dictate whether you need to simply restructure your debt with a DMP or seek forgiveness through debt settlement. Of course, if things are dire and you have multiple debts in the collections stage, bankruptcy is also an option.
Again, its important to remember that with any debt relief method you choose, your credit score will likely take a hit.
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Different Types And Uses Of Advanced Construction Equipment
The construction industry is experiencing more demand than ever before, given that urbanization is taking place at a faster pace the world over. The role that construction equipment plays therefore is of paramount importance. The more a company understands how to derive the maximum efficiency from each piece of equipment it has, the better its project execution becomes. Hereâs a look at the many purposes served by different kinds of advanced construction equipment:
- Surface Mining equipment, which includes electric shovels for mineral extraction, drills, mass excavators and giant draglines, which are extensively used in civil engineering.
- Underground mining equipment, while similar, needs to function under different space parameters. Advanced pieces of such machinery include scalers, scissor lifts, and continuous miners.
Figure Out Your Budget
Getting a handle on your income and expenses can you help you figure out if you have any extra money to pay down your debt. Paying more than the minimum each month can speed up your payoff timeline.
While youre focusing on debt payoff, work to build an emergency fund. Even a small one can prevent you from getting deeper into debt if an unexpected expense comes up.
Use this calculator to figure out your budget.
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How Payments Are Applied To Your Balance
If you dont pay your entire credit card balance by the due date, youll pay interest.
Different interest rates may apply to different types of credit card transactions. For example, cash advances often have a higher interest rate than purchases. This means different interest rates will apply to your balance depending on how you use your credit card.
Typically, your minimum payment will apply it to the portion of your balance with the lowest interest rate. Any amount you pay over the minimum payment applies in one the following two ways:
- to the portion of the balance with the highest interest rate
- proportionally to the entire balance
A credit card issuer that is a federally regulated financial institution can decide how it will apply your minimum payment to your balance.
Check your credit card agreement or ask your credit card issuer how it applies a payment to your balance.
How To Get Additional Help With Your Debt
Sometimes debt feels overwhelming and the prospect of coming up with a repayment plan on your own seems untenable. If that happens, you might consider contacting a .
Credit counselors provide debt management advice and assistance in negotiating down your debts. Although creditors are not required to work with credit counseling agencies, many will because even a partial payment is preferential to default for you and the lender. A debt management counselor can negotiate with creditors to lower your total balance or your interest rate, making it easier for you to pay off the account. Debt management plans typically have three- to five-year repayment terms.
The downside of working with a credit counseling company is that your credit score may drop at first if you end up repaying less than you originally owed. You’ll also likely have to close your accounts, which could affect your credit utilization ratio.
However, once you’ve entered a debt management agreement, you’ll only have to make one payment a month to your credit counselor. They will then distribute the payment to all of your creditors. This can make repayment less stressful since you’re no longer handling multiple accounts. Over time, you can rebuild your credit score through on-time payments and improved credit management habits, which your counselor can help you establish. To find a credit counselor, look for reputable nonprofit companies affiliated with agencies such as the National Foundation for Credit Counseling.
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Paying Off Credit Card Debt
When looking to consolidate credit card debt with a personal loan you should be aware of a few things to effectively get back on track.
Terms Repayment of a personal loan comes with terms, from interest rates and fees to how long you might borrow for. The repayment terms often range from from 24 to 84 months, and can determine just how much it will cost to borrow. The longer the term often means more will be paid in interest, even if it lowers your monthly payments.
Another option some choose is the use of a balance transfer credit card, which might seem like a good option on the surface but there are a few things you should know. They can your credit score, you might get a higher interest rate, and the promotional interest rate might run out before you are able to pay down the debt. While every person may have a different situation based on their own credit history, we would often recommend looking at personal loans before balance transfers to consolidate credit card debt.
Some Top Intro Apr Balance Transfer Credit Cards
Applying for a balance transfer card is very easy: Find the best card for you, fill out a quick 5-minute application, and check the mail for details on making payments to the new card. Here are some credit cards offering; intro APRs on balance transfers to consider.
One great way to save money on interest is to transfer your balance to a card with a 0% introductory APR. Youll get a little extra time to work on paying off your balance! The offers;0% for 18 months on Balance Transfers and;0% for 18 months on Purchases after you open the account.
The everyday APR is;;13.74% – 23.74% .
Best if: You want a great introductory offer.
Keep looking if: You want a card you can earn rewards with after youve paid off your balance.
;Good to Excellent. Youll need at least five years of credit history. This usually equates with a FICO score of 700 or better.
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Why Is Getting Out Of Debt Fast Worth It
90% of individuals say that money has an impact on their stress levels. A study found this entails impacts your health.
Having financial problems can cause it to be harder to save, budget in advance, or even start writing a list at a local store.
If extra debt money was available, it might be worth boosting financial confidence, morale, and opportunities to save. Financial experts regularly recommend two ways of reducing debt: the avalanche technique and the snowball technique. The two programs will help you focus on debt reduction. The snowball method is first to get your debts paid off, then take the next payday.
Both of these methods, however, require you to structure yourself and stick to a routine. If you would rather have support and someone to help you, it would be worth joining a service like Resolve to support you in solving your debt fast.