Should You Invest In Savings Or Payoff Your Debts?

I have faced this financial question 8 years ago and recently I have friends asked me this same question. I think I should write it up so that it may help some of you that having the same situation.

The decision whether to invest your monthly excess cash into savings account or paying off your debt is a tough one.

There are few factors you need to consider before you make the decision and I listed them down here to help you make an informed decision.

(1) Rolling or fix installment credit account

An example of your rolling credit is credit card. You may continue to add debt into the account while trying to pay off the debt. It is always recommended to pay off your rolling credit before putting into savings account. You should pay more than the minimum payment every month.

Other than paying more than the minimum amount, you should take the following recommended actions immediately to avoid deepen your debt:

(a) Putting your credit card away, keep it at home and don't carry whenever you go. I actually locked the credit card for months when my debt was reaching the un-tolerate level.

(b) Be frugal. Dont buy unnecessary. Be disciplined. I actually print out big words of 'Be Frugal' and stick them around the house. In the bath room, bed room, dining hall. I even carry a small 'Be Frugal' card in my wallet and I will see it when I take money out of my wallet.

(c) Get expert advice. If the debt is too deep and out of control. It is advisable to seek an expert advice

(d) Borrow money from your friends and relatives to payoff the high interest rate c^redit card debt

(e) Payoff the high interest debt with a lower interest personal loan

For the fix installment debt, in some cases you will be penalized if you pay off the loan faster. In this situation, you may want to invest your extra cash into savings

(2) Interest Rate

It is clear that you should pay off your higher interest rate debt than putting your money into savings with lower interest rate. This is not a fix rule, many experts recommended that you should save between 5-15% of your monthly income into savings. You should also save at least 3-6 months worth of monthly spending for emergency use. You have a decision to make between building your nest egg and paying off your debt faster for long term financial health.

(3) Debt Ranking

List and rank all your debts according to the interest rate. Always pay more than the minimum for the highest Interest debt and pay the minimum for lower interest Debts.

In summary, you should balance between building your cash reserve (for emergency use) and paying off your debts. There is no one fix formula for all. Make your own analysis and find out the mix that suit your situation considering the interest rates, debt ranking and whether it is a rolling or fix installment debt.

About The Author

David Chew is a professional marketer and He is the editor of Quick-Retirement Newsletter. Valuable Weekly Featured Articles and Tips that will help you Retire Quickly. Subscribe at: http://www.quick-retirement.com

Read his team latest breakthrough marketing report " The SIMPLE Strategy".... How To Earn $6,569 Per MONTH From The Internet With A Duplication System That Works": http://www.eliteteampro.com

---

Going Bankrupt in the World

It all starts by defaulting on an obligation: Money owed... Read More

How to Negotiate Debt Settlement

People over extend themselves financially as a result of a... Read More

Debt Collectors; And what you can do to Get Them Out of your Life

FTC opinion letter on validation Section 809(a) of the FDCPA,... Read More

IVA: Individual Voluntary Arrangement

What Is an IVAThe IVA (Individual Voluntary Arrangement) was introduced... Read More

Why You Should Get Out of Debt Today?

The main reason for getting out of debt today, is... Read More

Debt Elimination

If you're reading this article right now I'm sure that... Read More

Debt Negotiation and Debt Settlement

Debt negotiation and settlement can give you a drastic reduction... Read More

Budgeting and Debt Management

Debt management (specifically unsecured) is the first step to taking... Read More

New Bankruptcy Law Will Not Protect You from Identity Theft

Recently passed by Congress with overwhelming support, the oddly-named Bankruptcy... Read More

How To Get Out Of Debt

If you have found yourself in a position where you... Read More

Turning Bad Debts into Good Debts through Investing Fundamentals

If you've ever earned enough money to put some aside,... Read More

Debt Consolidation Versus Debt Negotiation

Debt consolidation versus debt negotiation are two options that are... Read More

Debt Problems? You Can Negotiate With Your Creditors

It is always possible to negotiate with creditors ? even... Read More

Take Careful Consideration Before Filing Bankruptcy

Filing bankruptcy is not fun! It is a last resort... Read More

Debt Free Living - 5 Tips To Get Out Of Debt

A few times I wonder what sort of credit system... Read More

Tips To Take Control Of Debt Collection

Yes, debt collection tips can help. You may think you... Read More

Budget the Luxuries First!

Strictly speaking, his advice was preceded by another Heinlein maxim... Read More

What Are The Benefits and Consequences Of Getting Rid Of Debt The Easy Way

We have all experienced getting so far in debt we... Read More

The ONE Law You Should Be Breaking

There is a law all smart people break.Parkinson's law.Parkinson's law... Read More

A Debt Elimination Process Must Be Initiated From You.

The first and maybe most important step in a debt... Read More

Different Ways Of Dealing With Debt

Bills, creditors, debt collectors. Are you yearning for the days... Read More

Yes to Less Debt

Feeling stressed by the amount of debts you have? Three... Read More

The 5 Secrets to Getting Out of Debt Fast

As they stare down at a teetering pile of bills,... Read More

Ten Ways to Get Out of Debt

1) Use your AssetsIf you have assets with some significant... Read More

Debt and Financial Optimism in the UK Continue

With £1.3 trillion pounds worth of debt in the UK,... Read More

Credit Card Debt & the Unfairness of the Universal Default Clause

Let's look at a real world example: A woman purchased... Read More

How to Deal with Bill Collectors

So you've screwed up. You're drowning in debt. Maybe the... Read More

How to Get Money When You Are Broke

(Money You Don't Have to Pay Back) 1. One way... Read More

Dont Let The Good Times Bury You

It is vital to get rid of debt while things... Read More

Personal Debt Reduction Practices

Personal debt reduction practices, the steps people take to relieve... Read More

Christian Debt Consolidation ? Feel Comfortable About Managing Your Debt

Many Christians feel uncomfortable with the notion of being in... Read More

Save Money When Going Out

It seems as though whenever we go out for the... Read More

New Bankruptcy Law ? Targeting the Wrong People?

Last April, President Bush enthusiastically signed into law the oddly-named... Read More