How Much Money Do You Boast

Category: Finance, Credit.

People are funny.

Perhaps that s why there are so many people that have both savings and debts. We don t always do what s best for us instead we do what feels best and try to suppress any reasons why it may not be the best thing to do. It s Simple Psychology. In saving you feel like you are laying a foundation for the future, whereas on the other hand paying off debt almost feels like throwing your money away. It just feels better to save. You re saving that money for improving your house, or for the kids education, in an account, or suchlike with a decent rate of interest.

Plenty, if you have debts. What could possibly be wrong with that? Don t Be Foolish. Here s an example: Say have$ 10, 000 in a savings account at 5% per year. $5, 000 on a credit card at an interest rate of 20% per year. There are pretty much no savings accounts that will offer interest rates as high as what the credit card companies charge. How much money do you boast? It s difficult to accept as true right now, but it really is much healthier to pay off your debt.

After as little as five years, the answer is effectively$ 0- your debt will have grown to around$ 12, 000, the same total that your savings are now worth. If you used half your savings to pay off that debt, you d be in such a better place. Think of Your Financial Future. You avoid five years of interest on the debt, but you still get to keep that$ 5, 000 in your savings account, earning interest and after five years, that s about$ 6, 18 If you d still prefer to keep your savings intact rather than using them to pay off your debts, ask yourself this basic question: is your pride worth$ 6, 380 of your family s money? When you have money enough to pay off your debt, there s entirely no reason to keep it. Debt costs money, and savings make money- you want as much of your finances as achievable to be savings, not debts. Debt is for people who don t have the money, and need to borrow it.

If your savings account and credit card are from the same bank, then you re in effect paying for the opportunity to borrow your own money from them. By paying off your debt with savings you ll also be less stressed about your debts, and your credit report score will rise- getting you a much better interest rate if you ever need to go into debt again. How ridiculous does that sound? It can be tough. It s money you should have been spending instead of making purchases with a credit card. You just have to keep in mind that any money you ve saved hasn t in reality been saved at all.

Of course, it feels bad to spend money thinking that you re spending away your future- but always bear in mind that when you use a credit card to spend that same money, you re spending away your future, plus interest. As it goes, if you ve got the debt, then those savings have already been spent.