Why You Shouldn’t Save When You Have Debt
Keywords: debt elimination
Humans are funny creatures. We don’t always do what’s best for us - instead, we do what feels best, and try to blank out any reasons why it might not be the best thing to do. Maybe that’s why there are so many people who have both savings and debts.
It’s a Matter of Psychology.
Yes, it feels better to save. Saving feels like building a foundation for your future, while paying off debt feels like throwing your money down a hole. That money is for the kids’ education, or for improving your house, or whatever else - and it’s in an account earning a good rate of interest. What could be wrong with that? Lots, if you have debts.
Don’t Be Fooled.
There are almost no savings accounts that offer interest rates as high as the ones credit cards charge. Here’s a question: if you have $10,000 in a savings account earning 5% per year and $5,000 on a credit card at an interest rate of 20% per year, how much money do you have? After just five years, the answer is effectively $0 - your debt would have grown to around $12,500, the same amount that your savings are now worth.
You might not believe it now, but it really is much better to pay off your debt. If you used half your savings to pay off that debt, you’d be in such a better position that it’s really amazing. You avoid five years of compound interest on the debt, but you still get to keep $5,000 in your savings account, earning interest - after five years, that’s about $6,380.
If you’d still rather keep your savings intact instead of using them to pay off your debts, ask yourself this simple question: is your pride worth $6,380 of your family’s money?
Think of Your Financial Health.
When you have enough money to pay off your debt, there’s absolutely no reason to keep it. Debt is for people who don’t have the money, and need to borrow it. Debt costs money, and savings make money - you want as much of your finances as possible to be savings, not debts. If your savings account and credit card are with the same bank, then you’re effectively paying for the privilege of borrowing your own money from them. Why would you do that?
There are other benefits to paying off your debt with savings. You’ll be less stressed about your debts, and your credit report will show that you were able to pay everything back - getting you a much better interest rate if you ever need to go into debt again.
I know it can be hard. You just have to remember that any money you’ve ’saved’ hasn’t really been saved at all. It is money you should have been spending instead of making purchases with a credit card. Yes, it feels much worse to spend money thinking that you’re spending away your future - but always remember that when you use a credit card to spend that same money, you’re spending away your future, plus interest. Anyway, if you’ve got the debt, then those savings have already been spent - stop denying it to yourself.
Gregg Hall is a business consultant and author for many online and offline businesses and lives in Navarre Florida. For more on this and other debt elimination strategies go to www.dtsfinancialgroup.com
Previous Articles Highlighter:
Credit Card Debt Statistics (1)
Let's take a look at a few statistics from the USA. The average family carries a balance of between $5,000 and $8,000 on all their credit cards, depending on which figures you believe.
How To Get Approved For A Car Loan After Bankruptcy Or With Bad Credit (2)
Basically, anything that does not belong on your credit file can be investigated by inquiring with the credit bureaus (Trans Union, Equifax and Experian). When an inquiry is opened, they must contact the original creditor and receive proof that the debt is valid.
How To Save On Your Auto Insurance Like George Bush (3)
Here's how to turn the tables in your favor and save money on your auto insurance like George Bush would if he had to pay for it. We've all seen the commercials and mailings for Progressive and Geico telling us to get online and compare auto insurance companies and get competing quotes.
Rising Car Arson And Insurance Fraud Costs Everyone (4)
According to many experts like Suze Orman and Anthony Robbins, debt, money, wealth, and happiness can all be learned and taught. A class on debt and money management should also be mandatory for all politicians (Could you imagine how great are economy would be if Ge orge Bush envisioned America's economy as his own and tried to cut the national debt instead of tripling it?) Debts are obligations we create and there are legal ways out of debt.
Car Dealer Scams (5)
$5 a day is $150 a month, is $1800 a year, is $9000 over 5 years too much you paid! Think about it). For the rest of this article and for many more great articles on similar, helpful topics, please be sure to visit www.bestskinpeel.com.
Get Out Of Debt Free Article (6)
Become committed to paying off all your debt. Stop incurring debt. Don't buy anything you can't afford. Debt should only be for emergencies (acceptable debt - a mortgage.
What You Need To Know About Debt That The Credit Card Companies Do Not Want You To Know (7)
It is now a buyers market and great deals can be found. What everyone needs to do, is rip up any store cards and credit cards save one. Mark this one for emergency use only.
How To Get Debt Collectors Off Your Back Permanently (8)
If you don't want to hear from them again, its easy. Just write them a letter stating that you wish they cease all contact with you (make sure you put in the letter that - P.S.
How To Qualify For The Best Rate On Your Mortgage Or Refinance (9)
Carry your preapproval with you when you house shop and watch what hurdles homeowners will go through for you. 4) Do not lie and be upfront about what you can and cannot document.
Boost Your Home's Resale Value Guaranteed (10)
Its not hard to green your lawn (use a weed & feed and apply it to the whole lawn - $20-$30). It will take a few weeks and will yield a major improvement.
U.S. Auto Manufacturers Are They Ready To Declare Bankruptcy? (11)
So, without a government bailout and no proposed new laws to halt the outsourcing and outflowing of jobs and such to overseas giants like China and Japan, it is only a matter of time before Ford and G.M.
Great Tips On Lowering Auto Insurance Costs (12)
A 4 door 4 cylinder car (Toyota Corolla) will almost always have a much lower premium than the latest 8 cylinder 2 seater sports car (Mustang GT (2+ 2 seating)).
7 Great Money Tips To Lead You To Financial Freedom (13)
Kharma is the big rule here -when you help others you will inadvertently help yourself. 7) Give back. Once you've made it it is only fair that you help others less fortunate than yourself.
Tax Lien Investing - Just Another Scam (14)
These are all lies. The rule is this - if it sounds too good to be true than it is. If tax liens were such a great business than why isn't everybody else in it?
Hot Stock Picks For This Week (15)
Piedmont Natural Gas (PNY) Industry: Natural gas/energy Results/returns: up 25% in the last 3 months, a hefty dividend, and a very safe bet - over 25 years of great history!
8 Tips To Improve Your Forex Trading By 100% Now (16)
My core system's are very simple and and very profitable! You do not need to have 10 indicators pointing in the same direction to take a trade. 5.
Why Is Umbrella Insurance Important (17)
Usually, you must maintain at least $250,000 of bodily injury liability per person, $500,000 per accident, and $100,000 for property damage for your autos, and $500,000 of liability for your home.
How To Find Credit Cards Without A Bank Account When You Have Less Than Perfect Credit (18)
These are also known as secured credit cards. This is a good card for people who need spending limits, such as teens, college students, or other people who may be financially irresponsible.
Adventures In The Real Estate Maze (19)
Most of the houses that we saw were nice in their own way. However, they did not match up to the perfect house that we were looking for. Moreover, we were in no hurry to spend that kind of money on a house that was not up to our utopian standards.
How Do You Get The Best Credit Card Rates? (20)
Are there balance transfer fees? What's the APR on balance transfers? How long does that last? A lot of cards will offer a 0% APR for perhaps 12 months on balance transfers.
Newer Articles Highlighter:
How To Quickly And Immediately Improve Your Credit (1)
Actually, according to MSN, many families are living only one paycheck away from bankruptcy and this is not good. To stop this one needs to put reigns on all unnecessary spending, but we will talk more about this further on.
Some Ideas For Debt Negotiation (2)
It's up to you just how much you feel your credit report is worth - if you're planning on getting a big loan anytime soon, this could be something to consider.
Got Bad Credit And Need A Car Loan? (3)
Call your local car dealers and ask as to which bureau their lenders pay more attention to (this is good to know as certain bureaus have more influence in certain areas of the country than others).
Are Cash Back Credit Cards A Good Or Bad Idea? (4)
If you have a good credit rating, then this card is a great option for you. Research different card companies - there are cards out there that offer you up to 3% cash back and impose very few limits.
Why Credit Cards Destroy Your Debt Reduction Plans (5)
Like anything convenient, though, credit cards have a flip side - in fact, they have lots. Can You Keep Track? When you walk into that shop and hand over the card, the money is taken from the card, and the card goes back into your wallet.
A Closer Look At Day Trading (6)
Day traders who arrange to access the NASDAQ level II quote screens can assess the strength or weakness of a stock and determine its movement in price. While day trading is completely legal and entirely ethical, it is highly risky.
How TO Buy A Foreclosed Home (7)
Some pre-foreclosure property owners may offer bargains to a persistent buyer. This is mostly because at this stage, credit collection agencies are constantly hounding the property owners, who would in turn want to resolve these issues to avoid any further harassment.
Some Of The Top Credit Card Mistakes (8)
Don't be one of these people. You should limit yourself to a maximum of three cards at a time - any more starts to make you look over-committed in your credit report, and could get you turned down for a bigger loan.
Things To Consider Before You Get A Debt Consolidation Loan (9)
Don't fall into this trap! Consolidating your debt and then running up more is an extremely bad idea. You Could Lose Your Home. Of course, this is the absolute number one most dangerous thing about debt consolidation.
Stop Paying The Minimum Payment On Your Credit Cards (10)
In our example (which is relatively typical), 50% of the payment was going on interest - meaning that paying the minimum gets you an effective 50% interest rate, even though your APR was only 12.7%.
Here Are Some Considerations When Applying For Credit Cards Online (11)
When comparing credit cards online go to more than one website, even though it may appear that the side by side examples are of different companies they may simply be different cards within one company.
Buying A Car? Do These Things First (12)
This is one of the biggest mistakes people make in their haste to buy a new car. Take the time to get pre-approved; you will get a better rate and a better deal.
Before Considering Bankruptcy Try These Things (13)
Take a good, hard look at your life, and realize that there are very few true 'basics': you can do without almost everything. Your house is probably full of quite valuable things that you never use, so bite the bullet and get rid of them.
So Why Would I Want A Prepaid Credit Card? (14)
Keywords: credit, credit card, secured credit card Our buying power today is based predominately on our credit rating. This is even more true today with the advent of computers and instant credit reports from companies such as Equifax and Transunion.
How Do I Know If I Should Buy Or Lease A Car (15)
Keywords: car parts, auto parts, cars, trucks, SUV There are many important differences to consider when you are deciding whether to get a loan to purchase a car or lease a car from a dealership.
How To Get Free Travel From Using Your Credit Card (16)
The credit card company on the other hand is able to earn income charging interest rates for credit used over a specific period of time. Credit card companies use as promotional or marketing strategies the giving of rewards to their card customers by giving points for every time they use their credit cards when making transactions.
How Your Credit Score Can Get You Better Rates (17)
By keeping a close eye on your credit report you will be able to tell if a mistake has been made more than likely. Equifax, TransUnion, and Experian are three major United States agencies that use FICO.
A Closer Look At Instant Approval Credit Cards (18)
This process of instant approval is basically used online or through the internet. To be able to prevent confusion in dealing with a credit card instant approval and to avoid being hit with huge hidden costs, you should know these facts: The credit card instant approval and the credit card application are two different processes.
How Do I Know What The Best Credit Card Would Be For Me? (19)
If you have difficulty paying your card off occasionally then you definitely want to be sure that you have the lowest rate possible. This can make the difference between manageable debt and a credit card balance that grows out of control.
How To Compare Credit Cards To Get Your Best Deal (20)
This will maximize the value of the card. Meaning, you can use the card on a normal basis and still have enough value if an emergency arises. Credit card companies offer tremendous bonuses on their cards.