Paying off Debt versus Saving for Emergencies
If you are in debt, paying it off and getting ahead of your finances seems like the most logi
cal choice. Then again, you also have the option to save money and place it into a fund in case of a financial emergency. Which one should you do? While there is no right answer for everyone, take a look at what advantage each one can give to you.
Paying off Debt
Being in debt can be a nightmare. Interest rates wreaking havoc and credit scores being
lowered can leave you in a tough situation. Because of credit cards’ high interest rates, you wouldn’t want to hold off on paying your bills for too long. Fees will add up quickly and before you know it, the next month’s payments will be due.
When it comes to student loans, the interest rates are a lot lower and are actually beneficial for you. Regularly paying your month’s dues can actually improve your credit score.
Saving for Emergencies
There are several factors to consider when you plan to save for an emergency fund. Things like job security and health can play a huge role in your expenses. Having an emergency fund can nearly save your life if something unexpected were to happen. It’s all about financial risk. If you see yourself teetering on the edge of a financial disaster, it would be best to save in a fund instead of paying off your current debts.
While paying off your debt would finally get rid of that monkey on your shoulder, consider the fact that after you nearly become debt-free what if you just so happen to lose your job? You have no emergency fund and all of your earnings were used to pay off your debt. This is the corner that you don’t want to be trapped in. It’s all about your financial situation and your lifestyle.
Bio: Kuba Jewgieniew is the head of Realty ONE Group, a real estate brokerage firm that has been rated as one of the fastest growing companies in America by Inc. 500.