Pay Down Debt or Build Up Savings? (1 Viewer)

Optimus Prime

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Both are goals of mine for 2008 I just wanted opinions on what the primary focus should be?

thanks
 
I save build savings (We want to save for a house down payments)

My wife wants to pay down all of our debt first. Her thinking is we could get more money for the house. I think I'm right =P
 
We are paying off my wifes student loans off first. Only 6k left. Then we will worry about saving.
 
Paying off debt, as long as you are not taking on more somewhere else, is saving in the long run. I'm hoping to pay off a good bit of debt while deployed.
 
It depends on whether you can manage the debt and if the interest is tax deductable. Most school loans and mortgages fall into that category.

NEVER pay large sums ahead on a note that you could potentially get into trouble on later (i.e.: a mortgage is still due for the normal amount every payment period even if you have paid extra principal). In this case, save the money until you have enough to pay the remaining balance off in full. Plus, you have it for other things if something unforseen happens.

My advice is to save first and, if the interest isn't killing you and it's deductable, continue to pay as you normally would to enjoy the write-off on your income taxes.
 
It also depends on the debt involved, interest rates, etc.

It's a lot more advantageous to pay down high interest, revolving debt (credit cards, for example) rather than sticking the same money in lower interest savings. On the other hand, it's a good idea to have some kind of emergency savings available in the hopes of avoiding further debt should something unexpected arise.
 
Pay down high interest debt first. It doesnt do you much good to save $1,000 a month at 5% annual growth if you have $10,000 in credit card debt at 15% interest. My $.02.
 
+1 to depends on the interest rates. If you can invest the money at a higher rate than your interest rate, you can profit on the lender's money. If not, pay down the debt.
 
As stated by many in the thread

Generally:

Pay off high interest debt first
Tax-deductible debt is fine to carry as long as you can handle it
Watch for such things as Student Loans which may actually disappear if you die and carry those longer
Saving is a must, so do both if you can as $ invested today is $$$ tomorrow
 
It matters what the interest rate on the debt is. But if you are in the market for a mortgage, you should also remember that your debt-to-credit ratio considerably affects your FICO score.

You can put down 20% or more for a down payment ... if you aren't eligible for a favorable interest rate on the mortgage loan, you'll still have a higher monthly note than you should.

i am keeping debt tightly under control, but still dollar-cost-averaging to stay in this investment market while it is nice and low.
 
i'm doing both, but concentrating more on paying off debt.

normally financial experts say you should pay off debt first. also if you pay off debt, you in turn raise your credit score which will help you down the road on home loans and such.
 
save a reasonable amount for emergencies then kill the debt. You get more less on tax savings than you spend on the interest. (go ahead run the numbers...)

If things go right...I kill my student loan next month, my wifes in 3 to 6 months then all I have is the truck and house, then I figure out what to do.

I have seen two methods of killing debt..

1. snowball method...pay off lowest total fist, minimum on rest regardless of interest rates... Kill one then kill the on to next. Your payments keep getting bigger and you feel like you have accomplished something. So mentally you stay with it.
2. highest interest rates first then on down. you save more money this way.
 
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It also depends on the debt involved, interest rates, etc.

It's a lot more advantageous to pay down high interest, revolving debt (credit cards, for example) rather than sticking the same money in lower interest savings. On the other hand, it's a good idea to have some kind of emergency savings available in the hopes of avoiding further debt should something unexpected arise.

Very well said.
 

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