When we think savings, we have to think retirement. After all, we cannot rely on Social Security. It just is not there as it is supposed to be. All of us would like to retire comfortably. Unfortunately, it does not look like that is going to happen for a good portion of the population. Many will be retiring centering their attention on debt-repayment. The dilemma is should we save or pay off debt?
If Only to Pay off the Debt
When we decide to put our money into paying off debt, we have nothing for emergencies except to use the credit cards. This can become a vicious cycle very quickly should there be an unforeseen emergency. We end up compounding the problem because we end up never seeing an end in sight to get out of debt.
Unfortunately, when deciding between saving money or paying off debt, the longer you put off saving the more you will have to put away later after taking care of the debt. Simply put:
- a credit card is a loan and every time you use a credit card for emergency purposes,
- You are in danger of going into debt further than you can afford.
Debt has been known to cause health problems such as depression, headaches, and heart attacks. It has also been known to cause strife and arguments within a marriage that descended to a marital breakup. The stress can be immense.
Is Saving Money in an Account the Right thing to do?
When thinking of saving money or paying off debt, saving money means that you will be spending money on interest making payments towards your debt. It seems like a difficult situation. Saving money does not allow much interest to accumulate in interest.
This also presents the problem that you might have to work past the normal retirement age because you will still be paying on your debt. Debt is always going to cost you more. One way we should all look at our debt when we want to use our credit cards is to think if we need to save money and pay off the debt it, and how long it will last us when we purchase something. Every time we use credit, we are using our future income to obtain something right now.
It is much better to save money and pay off debt instead of paying a higher interest rate. Debt is a very limiting monster. It can keep you from reaching your financial goals.
- • keep you from owning a home
- • purchasing a car
- • Getting a private loan
Debt can have a negative impact on your credit score as well as some services, like car insurance. They can pull your records to check on your payment history and quote you a price, based on the probability of that history.
Saving Money and Paying off Debt
Everyone should have an emergency fund. There should be between six and twelve months worth of savings for emergencies. Work towards $1.000.00, to start. Your best bet is to find some common ground and put an equal amount towards both savings and debt each month.
Using disposable income to begin saving money and paying off debt is a smart way to accomplish both tasks. That income is over and above what is used for your everyday needs. Save for Retirement or Pay Down Debt is the goal. Prioritizing this extra income will help clear your debt once you have the amount you require in savings.
The types of emergencies that your savings could be used for are:
- Job loss
- Medical expenses
- Prevent repossession
- Prevent eviction
- Prevent shut-off notifications
- Anything that requires immediate
The Emergency fund should not be used for things like:
- Going shopping
- Going out
When you save money or pay off debt, you are basically giving up one thing for another. The key is to find a balance where you can satisfy both needs and accomplish both goals to be able to retire comfortably and not have to worry about being crushed under the debt that occurred throughout your life. You needed credit to get the things that made life comfortable as you worked, now it is time to build toward the retirement that you want.
In conclusion, to save money or pay off debt is a personal choice. You are the one who has to decide whether or not you want to work into your retirement years or be able to relax a bit after working most of your life. Some people are workaholics and can’t stop working, even though they are free from debt to begin with while others struggle with work because they are still in debt over their heads.
[Read: Ways to Save Money]
The question is which one are you and which one do you want to be? Will you save money or pay off debt? Saving money or paying off debt is about finding that balance and sticking to it.