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

---

How Do I Lower My Debt Burdens?

How do I lower my debts?There are several ways of... Read More

Debt Elimination Is The Key to Financial Freedom

If you want financial freedom, the first thing that you... Read More

Free Quick and Easy Money Saving Tips ? Part 1

With the high cost of gasoline and the amount of... Read More

Reduce Your Debt

Do you want to reduce your debt? Having trouble paying... Read More

Debt Management - Is It the Right Choice For You?

Debt Management plans offer credit counseling clients a different and... Read More

What the Mail on Sunday Said

Anyone considering Bankruptcy may have experienced fear after reading an... Read More

Eliminate Your Credit Card Debt, But How?

Can a debt consolidation loan eliminate your credit card debt?... Read More

Taking The Plunge Into Bankruptcy

Bankruptcy is one of the most difficult things a person... Read More

Bankruptcy As An Option

If your financial worries are preventing you from sleeping at... Read More

UK Debt When Moving Abroad

The idea of moving abroad to escape debt seems to... Read More

Life After Bankruptcy

Bankruptcy and Credit - What Happens After Your Debts Are... Read More

Save Money When Going Out

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

Slowing Spending - The Key To Your Debt Plans Success

Anyone who embarks on a debt reduction program should know... Read More

How to Protect Yourself: Debt Collections

So you are getting collection calls? You're desk is full... Read More

The Debt Free Lifestyle

Many people have been taught that you cannot get ahead... Read More

What is Bankruptcy?

Personal bankruptcy is a legal way to give people with... Read More

Is There A Way Out Of Your Debt Problems?

Do you have multiple debts? Do you have just one... Read More

Debt Handling Solutions

Sometimes debt can seem overwhelming. In those instances, or even... Read More

New Bankruptcy Legislation May Make it Harder to Find an Attorney

The recently passed Bankruptcy Abuse prevention and Consumer Protection Act... Read More

What is Debt Settlement?

Debt settlement is the process of negotiating with your creditors... Read More

Bankruptcy - Your Fresh Start

Most American consumers are living too close to the edge.... Read More

How to Negotiate Debt Settlements

Knowing how to negotiate debt settlements is the key to... Read More

The Five Most Popular Questions About Bankruptcy

WILL MY CREDITORS STOP HARASSING ME?Yes, they will! By law,... Read More

Dont Let The Good Times Bury You

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

How To Get Out Of Debt

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

Bankruptcy ? Bankruptcy Myths

Bankruptcy has long been a big question mark in the... Read More

Turning Bad Debts into Good Debts through Investing Fundamentals

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

Going Bankrupt in the World

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

Bankruptcy: What the New Law Means to You

On April 20 of this year, President Bush signed a... Read More

New Bankruptcy Law Makes it Harder to Stop Foreclosure

On October 17, 2005 President Bush's sweeping bankruptcy reform law... Read More

Bankruptcy Reform: Designed to Protect Big Business

Who will benefit from the new bankruptcy reform laws? The... Read More

Debt Elimination 3

Planning To Achieve Debt EliminationOnce you have started the process... Read More

The First Step To Getting Out Of Debt: Make The Commitment!

These days, getting into debt is easy.Unfortunately, getting out of... Read More