Pay off your debts.
Plain and simple, all the money that you are putting towards your debts, including the interest on that debt, could be used for other things, including building up a savings account.
Being debt free can provide a number of benefits:
- Greater financial security. You can use that money you now have to put in to savings for a secure future.
- You will have more money to spend on things you want, without going in to more debt.
- Less stress. Dealing with creditors, debtors and making all those payments can cause excess stress that no one needs.
- Improve your credit score.
- Being a good example for your children on how to handle their money.
- You truly own what you have, not the bank.
- Making your own financial decisions. As long as you owe money to someone else, they have input in to how you spend your money.
Unfortunately for many of us, paying off our debts seems impossible because of the amounts we owe and paying just the minimum amounts on many of them won’t get us anywhere
How to pay off your debts:
- First and foremost make a commitment to yourself that getting out of debt is what you want to do and are willing to make the changes necessary to achieve this goal.
- Review your debts and be sure and understand their terms, including any penalties for prepayment.
- ALWAYS make at least the minimum payment for all your debts. If you don’t, you may be hit with penalties, increased interest and dings on your credit score.
- Make additional payments to your regular or minimum payments. This can be an extra $25 to your credit card or even more to your monthly mortgage or student loan. This will not only pay off your loan sooner, it will also save you money in interest paid on that debt – a win-win situation.
- Pay off debts with the highest interest rates first.
- For other options and information on paying off debt, visit the Federal Trade Commission’s “Facts for Consumers” web page.
- Create and live by a budget so you can get control of your spending and keep yourself from getting back in to debt.
Compile an accurate and complete list of all the debts you owe. Yes, this can be intimidating but you need to truly understand how much you owe in order to create a game plan for paying it all off.