Many people want to know: Should you pay off your debt or save money? The answer is both. If you have debt, it’s best to pay it off as quickly as possible.
After all, when you have debt, your lender is owed money, and it’s a good idea to get that money back as soon as possible. It’s also best to put your money towards something that will grow and help you build wealth.
That’s why you have debt in the first place. So, should you put your money towards your debt or towards saving money? If you have debt and are considering your options, here’s what you need to know.
What Is Debt?
Debt is when you borrow money to help fund your lifestyle. For example, if you have a $10,000 loan at 12%, then you owe $1,200. That $10,000 loan is your debt.
You’re not actually earning the money that you’re repaying that loan with, so it’s important to understand the difference between debt and savings. Since debt is when you borrow money, it’s also important to understand what it is exactly that you’re borrowing.
Should You Pay Off Debt or Save Money?
There are pros and cons to both options, so it’s up to you to decide which is better for you. While some financial pundits will tell you that you should always pay off your debt, that isn’t necessarily the case.
After all, if you have too much debt, it can greatly limit your ability to save and invest money. So, should you pay off your debt or save money? It depends on you, the person. If you have debt, and you’re considering your options, here’s what you need to know.
Why Paying Off Debt Is Better
If you have debt and are considering your options, here’s what you need to know. Why should you pay off your debt? Well, there are a few reasons why paying off your debt is a good idea.
- It takes less time. Since you don’t have to devote as much time to paying off your debt as you do to saving money, you can put your efforts elsewhere.
- It’s safer. Borrowing money is inherently risky, and the more you borrow, the more unsafe it becomes. If the economy takes a downturn, the government can seize and freeze all of your assets. With debt, that’s inevitable.
- You get more money back. The faster you can pay off your debt, the more money you’ll get back from your lender.
Why Saving Money Is Better
If you have debt and are considering your options, here’s what you need to know. Why should you save money? Well, there are a few reasons why saving money is a good idea.
- It’s more flexible. Saving money is flexible. It can be used for all kinds of different things, so it can be used for any purpose. If you want to buy a new car, a house, or open a business, you can do that with your savings.
- It helps protect you. The more you have, the less likely it is that something will happen to you. If something were to happen to you, your loved ones can take care of themselves.
- It’s more effective. The more you save, the more money you’ll have. That means you’ll have more options when it comes to investing your money.
There are pros and cons to both options, so it’s up to you to decide which is better for you. If you have debt and are considering your options, here’s what you need to know.
If you want to pay off your debt as quickly as possible, you should try to make the minimum monthly payments. After all, it’s usually much easier to pay $15 or $20 every month than it is to pay $300 or $400 every month.
If you can pay less, that’s great, but if you can’t, don’t worry too much. If you want to save money and build wealth, there are a few things you can do. First, work as many hours as you can.
Second, look for ways to increase your income. And lastly, try to cut any unnecessary costs out of your life, giving you a higher percentage of disposable income towards both paying your debt repayments, and putting some away in a savings account.