Should I Pay Off my Debt?
It is not fun being in debt. When you owe someone money, you always have that in the back of your mind, especially when you don't think you don't know if you can pay it back.
Have you ever borrowed ten or twenty dollars to a friend or family member, you probably didn't feel very obliged to pay it back because you agreed you'd pay it back when you could. If you instead owed them a thousand dollars with a 10 percent agreed upon interest rate, you'd have a bit more of a burden on your shoulders.
Even so, the money you owe to friends and family are rarely burdensome compared to other debts. It's the larger debts with high interest rates that are problematic. Credit cards are some of the worst with interest rates as high as 30% sometimes more. Also, it the debt can build up really fast because of the high interest rates.
Should you pay your debt off? Yes. When it comes to financial management, paying off your debt should be top priority. One of your life long goals should always be to pay off all your debt. Debt grows faster and faster the more you have.
One common argument is that a mortgage is okay because you get the tax deduction. A mortgage is okay, but you should still strive to pay it all off even if it takes the 30 years you originally planned. You can only deduct the interest paid, and not as a credit. If you didn't have the mortgage, you wouldn't have to pay any of it.
For example, let's say you have a mortgage and your interest for the year came to $5,000. You were in the 25% tax bracket, so if you deducted $5,000 you'd only save 25% of it or $1,250, not the whole $5,000. If you had no other deductions, you'd have been able to deduct more than that for the standard deduction anyway, which in that case would mean no savings. If you had no mortgage, you'd save $5,000.
Another argument with a mortgage is that you can invest any extra you would put towards paying it off and earn more than the interest rate. Even if it worked out this way, very few people would actually take the extra and invest it. If you can, then do it, but still pay it off in the 15 or 30 year mortgage you originally singed your mortgage as.
All other debt should be paid off as soon as possible. Credit cards, auto loans, personal loans, student loans, etc. should all be paid off right away in order to save money and start saving for things you really want and need.
Have you ever borrowed ten or twenty dollars to a friend or family member, you probably didn't feel very obliged to pay it back because you agreed you'd pay it back when you could. If you instead owed them a thousand dollars with a 10 percent agreed upon interest rate, you'd have a bit more of a burden on your shoulders.
Even so, the money you owe to friends and family are rarely burdensome compared to other debts. It's the larger debts with high interest rates that are problematic. Credit cards are some of the worst with interest rates as high as 30% sometimes more. Also, it the debt can build up really fast because of the high interest rates.
Should you pay your debt off? Yes. When it comes to financial management, paying off your debt should be top priority. One of your life long goals should always be to pay off all your debt. Debt grows faster and faster the more you have.
One common argument is that a mortgage is okay because you get the tax deduction. A mortgage is okay, but you should still strive to pay it all off even if it takes the 30 years you originally planned. You can only deduct the interest paid, and not as a credit. If you didn't have the mortgage, you wouldn't have to pay any of it.
For example, let's say you have a mortgage and your interest for the year came to $5,000. You were in the 25% tax bracket, so if you deducted $5,000 you'd only save 25% of it or $1,250, not the whole $5,000. If you had no other deductions, you'd have been able to deduct more than that for the standard deduction anyway, which in that case would mean no savings. If you had no mortgage, you'd save $5,000.
Another argument with a mortgage is that you can invest any extra you would put towards paying it off and earn more than the interest rate. Even if it worked out this way, very few people would actually take the extra and invest it. If you can, then do it, but still pay it off in the 15 or 30 year mortgage you originally singed your mortgage as.
All other debt should be paid off as soon as possible. Credit cards, auto loans, personal loans, student loans, etc. should all be paid off right away in order to save money and start saving for things you really want and need.
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Should I pay off my debt? Learn more about financial planning for retirement and get more solid financial information.
posted by Credit Counseling at
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