Should I Pay Off my Debt?
If you have ever owed anyone money before, you know the burden it can have held over your head. Also, it depends on who you owe money to whether or not it is a burden or at least how much of a burden it is.
If you borrowed fifty dollars fro a friend and neither of you negotiated any kind of interest rate, you just agreed to pay it back when you could, you're not going to feel very obliged to pay it back. On the other hand, if you owed a thousand dollars for a personal loan with a 12% interest rate, that's a different story.
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 argument is the tax deduction you get from your mortgage. The truth is you only get to deduct the interest you pay on your mortgage and when you deduct it, you only save a percentage.
For instance, if you paid $3,000 for the year in interest on your mortgage and you were in the 20% tax bracket, you would only save 20% of that $3,000, or $600, not the entire $3,000. If you didn't have a mortgage, you'd save the whole $3,000 in interest.
Another reason people say you should have a mortgage is that you could invest the money that you haven't put down on the house and invest it at a higher rate than you are paying. Sure, this could work, but how many people actually have all that money put aside right now and how many would actually invest it like that?
Even if you kept your mortgage and paid it off in 15 or 30 years, all your other debt should be paid off as soon as possible. Even better, don't take out loans for things you can't afford. A house is enough. Otherwise, buy used and save until you can buy what you want. - 16931
If you borrowed fifty dollars fro a friend and neither of you negotiated any kind of interest rate, you just agreed to pay it back when you could, you're not going to feel very obliged to pay it back. On the other hand, if you owed a thousand dollars for a personal loan with a 12% interest rate, that's a different story.
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 argument is the tax deduction you get from your mortgage. The truth is you only get to deduct the interest you pay on your mortgage and when you deduct it, you only save a percentage.
For instance, if you paid $3,000 for the year in interest on your mortgage and you were in the 20% tax bracket, you would only save 20% of that $3,000, or $600, not the entire $3,000. If you didn't have a mortgage, you'd save the whole $3,000 in interest.
Another reason people say you should have a mortgage is that you could invest the money that you haven't put down on the house and invest it at a higher rate than you are paying. Sure, this could work, but how many people actually have all that money put aside right now and how many would actually invest it like that?
Even if you kept your mortgage and paid it off in 15 or 30 years, all your other debt should be paid off as soon as possible. Even better, don't take out loans for things you can't afford. A house is enough. Otherwise, buy used and save until you can buy what you want. - 16931
About the Author:
Should I pay off my debt now? Learn more about simple financial planning for retirement and get more great financial information.
posted by Edgar at
02:27
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home