Eliminate your Debt

The decision to eliminate your debt or put your money into savings is a tough one. There are many variables to consider before making the best decision for your situation.

When you're working on a budget, a common question is whether to use your excess cash to rid yourself of debt or build up your nest egg. Financial experts agree that savings is an important part of every budget and most recommend putting 5% - 10% of your income each month into savings. Is this a good idea when you're in debt? It's an important decision to make. While having a savings account is a way to plan for the future, becoming debt-free is an excellent strategy for creating long-term financial health.

Review Your Debt
An easy way to get a big picture view of your debts is to write them down. Make a list of your debts by creditor name, amount owed, and interest rate. List them in the order of highest interest rate to lowest interest rate

Its your Hand choices now ..

So far it may sound as if paying off debt before investing in savings is the best option. Keep in mind, most financial experts recommend budgeting 5% - 10% of your income each month for savings. They also recommend having three to six months worth of living expenses in an emergency fund. So what should you do? Here are the options so far:

Pay off debt before investing in savings. This will look good on your credit profile, but you won't have a financial cushion if you need it.

Make the minimum payment required on your debt and create a savings account. This will give you a financial cushion, but it will prolong the life of the debt and may cost you more money in the long run.

Find a balance between paying off debt and investing in savings. Paying off debt now while working toward building a savings puts you in control of your money. You may want to pay slightly more than the minimum payment required on your debt and put the rest in savings.