If you’re drowning in high interest debt yet realize the need for saving it’s a tough row to hoe on how to accomplish this, but not impossible. Most high interest debt is created by shiny, easy to use credit cards that come with the promise of building up air or cruise miles.
You earn an average of one mile per dollar you spend. Some even offer money-back rewards. This last one is not too bad a deal. At least you get something back for spending your money through them. However, it would be good to be mindful of the interest rate and empty promises.
Saving on the high interest would have enabled you to buy your own ticket for much less. Credit card interest can be as high as 29% or more and if you don’t pay off your charges in full each month that’s money down the drain.
Develop a budget and stick to it. If you’re married, work together on this. Getting your financial house in order is much more fun and easily done if you work as a team. Two can pay off debt more quickly than one. Just be careful that you don’t come together to create more debt.
Compare your debts and their interest rates with your savings account interest rate and if your debt rates are higher, you’re losing money. Develop a plan to pay down as quickly as possible the debt with the highest interest. Then, you can focus on other debt until you are free of debt. Get rid of the card with the high interest rate you are paying off.
Look for extra money to pay off the debts. Eliminating some items and vacation plans can help. Even if in some cases it might take months or years to pay everything off, it’s important that you don’t accumulate any extra debt. Jut paying an extra $100 on a debt with 18% interest, you save $18. If you pay only the minimum required you’ll pay off the debt in the maximum amount of time.
Limit borrowing from family and friends only if there are no alternatives and you are becoming overwhelmed. Even if you have to pay them a lesser interest rate it could be a solution. If you resort to this, pay them back without hesitation as soon as possible. Don’t lose a good friend over money.
Financial experts advise families to allocate between five and ten percent of their income toward savings and this should be your goal once you’re out of high interest debt. It is not wise to keep money in your savings account while you are still paying off high interest debt. Consider talking to a financial consultant about how better to manage your money.
Find a balance between contributing to debts and savings. You can envision paying off debt as an investment. Being clear about your financial situation is essential to become debt free. Being debt free can be very liberating, both mentally and financially.
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Tags: business and finance, credit, Credit Debt Consolidation, Debt Consolidation