Common mistakes that you should avoid while making a budget
What is important Pay Off Debt or a good budgeting?
Dealing with debt can easily be one of the worst feelings one can have. It leaves you feeling as if you’re stranded with no light at the end of the tunnel. While most people will tell you that cutting out debt should be your number one priority, that’s not always the case.
Pay Off Debt First
1. Boost Your Credit Score
If you have any plans in the near future to either purchase a new home or even refinance, then your credit score is going to be on the top of your priority list. By paying off debt, you will be able to lower your debt to available credit ratio, which is a large part of your score.
2. Lower Monthly Payments
By paying off any high interest debt that you may have, you will be reducing your overall payments each month. This will allow you to save that extra money and put it towards an emergency fund, saving for the down payment on a house or for retirement.
3. Piece of Mind
For those of you who sleep better knowing that you don’t have any debt hanging over your head, you will ultimately want to eliminate your high interest debt. Especially before you start any saving.
Start Saving First
1. Low Interest Debt
If you have a higher rate of return on your savings account than the interest rate on your credit card or other loan type, you should consider delaying debt repayment. While you should still gradually pay off debt, there is no real incentive to pay off low interest debt.
A good example is moving any credit card debt to a 0% balance transfer credit card. This will put off paying any interest for anywhere up to 18 months and allow you to build up your savings. Make sure you continue to pay regular amounts to your debt or else you will be in a bad situation again, especially once the promotion credit card interest rate expires.
2. Protect Your Emergency Fund
If you currently have a nice sized emergency fund saved up, it might not be the best time to tap into it in order to help pay off debts. While you might currently be employed, the past has shown us that things can change very quickly. Having the emergency fund might be the best thing for your family.Follow us on http://www.facebook.com/debtconsolidationcare
Before you determine whether or not you want to speed up the payments on your debt or start saving, you need to first consider a couple of things. First, do you have a high interest rate on your debt? Second, does your family feel secure with the savings you currently have?