Posted: 9/22/2010 6:18:27 AM EDT
| You get a small unexpected amount of money over and above what you usually get on a monthly income. It is enough to pay off one debt at a lower interest rate or pay down a debt at a higher interest rate. Which do you do? |
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You get a small unexpected amount of money over and above what you usually get on a monthly income. It is enough to pay off one debt at a lower interest rate or pay down a debt at a higher interest rate. Which do you do? Assuming the tax consequences are neutral, I would pay down the higher interest rate debt first. |
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You get a small unexpected amount of money over and above what you usually get on a monthly income. It is enough to pay off one debt at a lower interest rate or pay down a debt at a higher interest rate. Which do you do? Assuming the tax consequences are neutral, I would pay down the higher interest rate debt first. In the long run, this is the smartest thing to do. However, by paying off the smaller, lower interest debt first, it frees up more money each month by eliminating a payment. That gives ya a little more breathing room each month. |
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Pay off the smaller debt, and use any freed-up monthly payments to aggressively attack the larger debt. It's called the Debt Snowball, and millions have used it to get out of debt. Read "The Total Money Makeover", by Dave Ramsey. Good luck. 
Good advice here. |
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Pay off the smaller debt, and use any freed-up monthly payments to aggressively attack the larger debt. It's called the Debt Snowball, and millions have used it to get out of debt. Read "The Total Money Makeover", by Dave Ramsey. Good luck.
This really does work. My wife and I are using this approach now (Wedding, college, house work, etc) and it's very effective. However, we've also made it a policy to not close older credits as that only helps in the game of "Credit" and that make that damned whore named "FICO" looks better. |
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Pay off the smaller debt, and use any freed-up monthly payments to aggressively attack the larger debt. It's called the Debt Snowball, and millions have used it to get out of debt. Read "The Total Money Makeover", by Dave Ramsey. Good luck.
Good advice here. Good advice if you do the entire system. If not, there are much better ways. |
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You get a small unexpected amount of money over and above what you usually get on a monthly income. It is enough to pay off one debt at a lower interest rate or pay down a debt at a higher interest rate. Which do you do? Typical debt slave spends the extra money on something they don't really need. They should listen to Dave Ramsey, pay off the entire low interest rate debt, which will then make them excited about debt reduction, which will motivate them to pay off the higher interest rate debt. Rational person pays off the higher interest rate debt. He then takes the money he saves by not paying higher interest and plows that back into paying off the rest of the debt. Rational person is debt free sooner than the typical debt slave. Typical debt slave is motivated by the process. That is probably why they are in debt in the first place, the pleasure of something new now outweighs the penalty of having to pay interest Rational person is motivated by the result. Being out of debt is the desired outcome so they take rational steps to achieve that goal as quickly as possible. Rational people probably aren't in debt to begin with, so I'm guessing most "Debtor Americans" fall into the debt slave category, and need a "gimmick" to fix their broken relationship with money. |
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You get a small unexpected amount of money over and above what you usually get on a monthly income. It is enough to pay off one debt at a lower interest rate or pay down a debt at a higher interest rate. Which do you do? Assuming the tax consequences are neutral, I would pay down the higher interest rate debt first. In the long run, this is the smartest thing to do. However, by paying off the smaller, lower interest debt first, it frees up more money each month by eliminating a payment. That gives ya a little more breathing room each month. This. The high interest debt costs more, but you'll be able to pay it off earlier with the $$$ freed up by paying off the low interest debt. |