Debt Elimination Strategies
Whatever You Do...Don't Save Money
by
Leo Quinn
No, that's not a misprint. Even though falling interest rates are good
when you want to get a loan, they are bad for people with savings
accounts.
In this economy your best investment, the best place to put your money
is into paying off debts. Think of it as investing in your debt because
that is exactly what you are doing.
If you put $1,000 into a bank savings account earning 2%, at the end of
a year you will have $1,020.
If you carry a $1,000 balance on a credit card with a 19% interest rate,
and you pay the minimum monthly payments, at the end of one year you
will have paid $190 in interest.
If you get $1,000 in a tax refund, small inheritance or from somewhere
else you now have a choice to make. You can earn 20 bucks in a savings
account or save $190 by paying off that credit card. Keep in mind that
your 20 bucks is taxable income so you'll be left with $15 or so after
taxes.
Do you need a savings account for emergencies? That savings account may
be causing those emergencies! Think about it this way...
If you are earning money in a savings account at 2% and paying anything
over 2% on your debts you are sliding backwards financially and you'll
never get ahead. It's basic mathematics.
If you earn 20 bucks for five years in your savings account you'll have
$100. If you pay $190 in interest on your $1,000 credit card after five
years you will have paid $950 in interest charges.
In other words you have wasted, lost, burned or flushed $850 by having a
savings account. ($950 - $100 = $850) OUCH!
What can you do? Pay off that credit card and use that as your emergency
fund. It's not the best way to do it but it's better than earning 2% and
paying anything over 2%.
So, while the stock market is on it's roller coaster and the economy is
challenged your best investment, bar none, is your debts! Get them paid
off!
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About the Author:
Leo J. Quinn, Jr. is a financial educator from the Albany, NY area. For
the last eight years he has been stunning audiences by showing them that
paying off their highest interest rates debts first and/or paying extra
on more than one debt is often the SLOWEST way to get rid of those
debts. He has a
special offer for Momscape readers here.
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