Should you hold off on saving until your nonmortgage debt is paid off?
Simple math suggests it’s better to get rid of debt before saving for retirement or an emergency fund. After all, if the savings rate is 1 percent and you have credit card debt at 14 percent interest, money is better spent paying down debt quickly.
“Like everything else in life, this decision is one of balance, not of absolutes,” says Michael Rubin, president of Portsmouth, N.H.-based Total Candor, a provider of financial education.But personal finance decisions are rarely so simple, and this method may not be the right choice for everybody.
Dean Barber agrees. The host of nationally syndicated talk radio program “America’s Wealth Management Show” says there are pros and cons to each approach.
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April 21st, 2010 at 7:33 am
From my own personal experience in the debt relief industry, it is fair to say there is no exact way to go about this problem. I do think you should save up at least a few months worth of living expenses while you continue to pay down your debt. It might take you longer, but you will at least have the security of knowing that in case something bad happens (job loss, major car repair) you will be able to make it for at least a couple of months. Hope this helps.
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