Building Your Personal Savings Vs. Repaying Your Debts

Having a budget and sticking to it is important, especially in this day and age. We never know what kind of emergency situation may arise, whether it be family medical, family vacations, car or home repairs, etc. One thing you don’t want to have to worry about are bad credit loans in your future, so taking care of budgeting and saving and repaying your debts now is essential.

However, many of us may come to ask ourselves, which is more important to do first? Pay off debts that currently exist or build on our personal savings? Many of us have a lot of debt, but very small savings. It is not a clean cut decision, it takes a little analysis to figure out which is your personal financial best plan. In most cases it would be best to repay the outstanding debts you have, interest and fees add up after the years and if you are only paying the minimum payments on them it can take many many years to pay them off. One exception to this rule would be if your debts have a very low and fixed interest rate and the money you put in savings is earning a higher interest rate.

However, do not ignore your large credit card and other debts, you will lose in the end. By paying only the minimum amounts due you would end up spending much more than if you paid off quicker and waited to put the money into savings. Interest and other fees add up tremendously over the years if you only pay minimum monthly payment on these types of debts.

Meaning your personal financial condition will get worse rather than better. Your liabilities grow in the debts faster than you save your assets in savings. The end result, having to take your earned savings out and paying off the huge debt anyway. Making the strategy of savings over repaying your debts futile.

The best advice from a professional financial planner is to repay debts now instead of waiting and putting that money into a savings. Once you have got a control of the debt and have repaid it you can concentrate on savings and building your finances. This way you stay clear of possible defaults or late payments on the debts you currently have. Once you do this you can only end up seeing a bad mark on your credit report and cost you the possibility of receiving loans in the future.

Also once you have freed yourself of the large debts that you have created, you will be able to focus more stress free on building your savings. Then you can open up a new passbook savings account or checking accounts from banks with free checking and get even some extra money back with banking or checking account promotions. Having the ability to lock your funds into a better investment and receiving a higher return on your well earned savings in the future.

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