Should I Pay Off My Debts Or Save Money?

by Adam on May 16, 2017

For many individuals who find themselves struggling with debts, money is a precious rarity that presents a big dilemma.

Using credit cardsIndeed, when money is rare – which is often the reason behind the debt or debts – it is difficult to know how to manage it best. Managing your finances is, strangely enough, a skill that only a few chosen ones can develop naturally. Most people will learn from their past mistakes. In short, it is likely that today’s millionaires would have tasted the bitter taste of debts and money struggles in the past. As a result, the advice that these qualified life experts have to give is helpful and pragmatic. They know what can go wrong and they understand the risks of investment and poor money management strategies. Therefore, they are the best people to turn to if you don’t know how to manage your assets when you are in debt: Should you pay off or should you save? Here is what money experts have to say about it.

 

The Priority is To Clear Your Debts

It makes no doubt that the priority in a situation where you have debts, is to pay off your debts. Whether these are linked to a mortgage agreement, your credit cards or even a loan, debts need to be managed carefully. This means that you need to find a solid balance that allows you to clear off your debt gradually – in monthly payments for instance, as it is the most common way to proceed – without putting you in the red. More often than not, getting rid of your credit card is the safest way to design a simple balance of expenses and savings for you to stick to. It is important that you only pay for what you can afford and what you need. To put it in other words, you may not need the latest car model or a jacuzzi in your bedroom. As simplistic as it sounds, most debts occur from not managing your finances properly and taking on more than you can pay for.

Turn Financial Challenges Into Positive

However, when you set your path on debt repayment, it doesn’t mean that you will not face a future situation where you will need a loan. While it is commonly difficult to get a loan if you have debts – although you can find loans online for bad credit –, people tend to forget the advantage of such loans. If you work with a clear and honest financial balance, you will be able to manage your loan repayments. This puts you automatically in a better position for your next loan, and more importantly, it affects your credit score positively. Being able to repay your loans, especially with bad credit, helps your situation to change for the best. In short, don’t shy away from loans: Plan them carefully, instead.

Create A Solid Saving Position

At a stage where you have been able to design a management solution for your finances, which allows you to repay your debts gradually and to improve your credit score, you should also be able to set new financial goals. While paying off your debts is essential for your financial reliability, being able to save can help you to avoid further debts.

In short, the answer to the question should I repay or should I save is both

 Indeed, your emergency fund needs to contain enough to stop you going further into debt when the next crisis comes up. Start with £1000 or so, although your circumstances might mean that figure is more of less. Once you’ve paid off your debts, you can begin building a more substantial emergency fund, typically the equivalent of three to six months’ worth of living expenses so that you can face any unexpected situation.

 

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