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Prioritizing Debt & Savings

Prioritizing Debt & Savings

Americans are keeping a closer eye on their financial health more today than they did a decade ago and part of that reason is due to the lessons learned over the past several years.

The question many are asking though, is whether or not they should be saving more or focusing on paying down their credit card debt. It’s a tough quagmire, though one that actually has more than a few simple solutions. Take a look –

The Tools

There are many smart decisions you can make that will help you reach your financial goals. It doesn’t have to be an “either/or” situation. Many consumers are transferring their credit card debt to 0% APR balance transfer credit cards in order to get a step ahead of the curve – and for most, it’s working. Others are focusing on the assets they already possess, such as a savings account that does have a balance. They’re taking this into consideration as it serves as a foundation from which to build upon. Still, others are digging in their toolboxes and finding themselves severely limited. High credit card balances are almost a sure sign that trouble’s looming.

Questions You Should be Asking

The questions you need to be asking include how much credit card debt you’re carrying. Naturally, the higher that number, the more crucial it becomes that you make paying it down your top priority.

After all, maxed out credit cards (and certainly when you have 2, 3 or more) can quickly eat away at any savings you’ve already managed to put back. If you’ve made a late payment in the past year or so, you already know those late payment fees are gruesome, so you certainly want to avoid that. It’s the epitome of running circles and getting nowhere.

Also, take a look at your credit history and current credit scores. Are they acceptable or are there “over your credit limit” charges or other blemishes? If your credit history is suffering due to the credit card debt you’re strapped with, you might want to focus on paying that debt down considerably before you begin saving. Also, if you’re hoping to buy a new home in the next few years, you’re going to need a strong credit rating and by taking steps to fix it, you’re positioning yourself for a better interest rate.

Are your spending habits generally cautious and thoughtful? If you can resist temptation, odds are, you already have a grip on your credit card debt and perhaps cushioning your savings account might be a focus that works, even if it’s only for awhile. Looking to refinance or buy a new home? Again, a savings account is going to be crucial during the financing process (although, your credit card spending habits are important too); but for the most part, lenders want to know you’re disciplined and can hold on to your cash..

A Combination – Maybe

Let’s say you’re really not where you’d like to be (debt free with at least three months salary in savings), but you’ve always made great strides in your efforts. Perhaps it’s best to set aside a certain percentage each month that’s dedicated for both paying down debt, especially credit card debt, while also making deposits to your savings.

Five years ago, that’s exactly what many of us were doing; however, with so many Americans who are taking jobs that they’re overqualified for as well as those who are working part time, it’s simply not an option to do both – and for some, just getting the bills paid at all is something they worry about each month.

Also, if you do take the “debt first, save later” route, you’ll be paying yourself that interest that would have otherwise gone to the credit card company. No matter which avenue you take, whether it’s combining your credit card balances to a low APR credit card or taking advantage of a zero balance transfer credit card offer, maintaining your focus will help you meet your objectives far sooner.

Finally, it’s also important to keep your perspective. There are millions of Americans who in financial trouble these days. By keeping the fact that it can be fixed in the back of your mind you’re less likely to panic ad lose sleep. Credit problems are temporary and while building your credit scores back up takes it, you can be sure it’s time well spent.

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Copyright © 2023 | Image: Not posted | Categories: Credit Card Basics, Credit Card Debt, Credit Card Tips

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