Pay Down That Debt

The U.S. savings rate is at an all time low while debt is steadily rising. Most people will be receiving an income tax refund within the next few months. My advice use at least part of this money to pay down debt.

I know you want to use the money for your summer beach vacation, or that new pair of Manolo Blahnik slingbacks, or a flat screen plasma. The list goes on, but unfortunately sometimes so does the debt. So lets strike a compromise. Use part of the money for debt repayment. No it doesn't have to be half. That would be optimal, but I know for most people its highly unlikely. Where should you put that money? Let's discuss.

The first debt you should try to repay is high-interest credit card bills. With the rules changing and minimum payments doubling this is the best way to go. When you pay your credit card bill every month, the majority of your payment goes to interest. So it only makes sense to pay this off first.

If you have no credit card debt, then I would suggest you look at personal loans and/or car loans next since these types of loans generally have a higher interest rate. Since mortgage interest is deductible for some, and student loans are deductible for everyone, I would save these for last.

Point is, take some of that money and pay off that debt!

Till next time...