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

Optimus Prime

Subscribing Member
VIP Subscribing Member
VIP Contributor
Joined
Jul 18, 1998
Messages
6,022
Reaction score
4,651
Online
Both are goals of mine for 2008 I just wanted opinions on what the primary focus should be?

thanks
 

d3cyph3r

Hall-of-Famer
VIP Contributor
Platinum VIP Contributor
Joined
Sep 11, 2004
Messages
3,084
Reaction score
1,077
Location
Metairie
Offline
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
 

ibelieve

unnecessarily vulgar
VIP Contributor
Joined
Jun 3, 2005
Messages
6,929
Reaction score
900
Age
34
Location
LaPlace
Offline
We are paying off my wifes student loans off first. Only 6k left. Then we will worry about saving.
 

BullDawg

Gone but will never forgotten. R.I.P. Nate
Joined
Aug 13, 1998
Messages
41,147
Reaction score
3,269
Age
47
Location
Anniston, AL
Offline
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.
 

rob021275

Guest
Joined
Nov 20, 2004
Messages
2,662
Reaction score
438
Location
Marrero, LA (What the fellas be yellin')
Offline
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.
 

DavidM

Admin Emeritus
VIP Contributor
Joined
Sep 1, 1999
Messages
45,177
Reaction score
17,724
Online
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.
 

UGASaintsFan

Guest
Joined
Jul 30, 2001
Messages
882
Reaction score
0
Age
38
Offline
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.
 

Jonesy77

Banned
Gold VIP Contributor
Joined
Sep 27, 2006
Messages
12,651
Reaction score
6,870
Age
41
Offline
+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.
 

Hoyasaint

Banned
Joined
Dec 10, 2004
Messages
4,943
Reaction score
14
Age
12
Location
Mid-City
Offline
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
 

gaminerie

...if you like saxophones
Joined
Aug 13, 2002
Messages
14,503
Reaction score
1,155
Age
44
Location
Slidell, LA
Offline
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.
 

Jackavelli

Sarang Upso
Joined
Jul 8, 2001
Messages
12,186
Reaction score
3,413
Location
International
Offline
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.
 

Rob Beaux

Hall-of-Famer
Joined
Mar 21, 2003
Messages
3,889
Reaction score
758
Age
46
Location
SE Louisiana
Offline
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.
 
Last edited:

Bayouboy

Football Genius
VIP Contributor
Joined
Dec 30, 2000
Messages
10,265
Reaction score
1,775
Age
45
Location
Vacherie, LA
Offline
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.
 

saintsfan342000

The Voice of Reason
VIP Contributor
Joined
Sep 20, 2004
Messages
3,293
Reaction score
1,570
Age
32
Location
Austin, TX
Offline
I'm still very young and have no financial savvy, so my input might not be worth much, however comma:

I was listening to some financial talk show on KLBJ, 590 am, here in Austin just a few days ago, and someone phoned in with the nearly the same question as you (he was a college student who wanted to know if he should pay off college loans before he starts saving once he graduates and gets a job). They host said that if a person is in debt, clearing that debt should be their top priority, because saving when in debt is not really saving...it's actually just reducing your debt without paying off the debt. Make sense?

Hope I conveyed that well and that it helps.
 

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.

Users Who Are Viewing This Thread (Users: 0, Guests: 1)




Headlines

Saints Headlines (Official Site)

Top Bottom