|
The question of whether to save money or pay off debt is something that many people struggle with. There are pros and cons to doing both of these things. If you are able to save money and create an emergency fund, you will be able to feel secure that you can handle any issues that may arise. If you are able to pay off your debt, you will free up more of your money with which to either spend or save. The answer of which is more important will vary depending on an individual’s situation, but there are some things to consider that may help you make your decision. The Benefits of an Emergency Fund Some experts recommend that you have at least six months worth of income saved for emergency purposes. This money will help you overcome any financial pitfalls that you may come across. The emergency fund will allow you to pay for the things you need with cash. If you do not have an emergency savings fund, you will have to either do without something or borrow more money to pay for the emergency. This may cause more harm to your financial situation. The Benefits of Paying off your Debt Just as in creating an emergency fund, there are also benefits to paying off debt. If you have to make monthly payments on your debt, you are tying up money that might be used in other ways. It also costs money to carry debt. You may be required to pay interest on your debt which you would not have to pay if you did not owe the money. There are other advantages to paying down your debt. If you wonder, What is a bad credit score and how can it happen? Carrying too much debt is one of the factors. As you are able to pay off your debt, your credit score will improve. This will not only make it easier to borrow money if you need to, it also can help you lower your insurance costs or even help in getting a new job. Your credit score is important and if you deal with your debt, it will improve. Which One to Choose When you look at the benefits of establishing an emergency fund vs. paying off debt, you may be wondering which is better. The answer lies somewhere in between. It is possible to accomplish both of these goals at the same time. A few steps will get you started on the right path. • Figure out what you owe. This step will include not only the total amount of debt you owe, but also how much you pay a month. • Figure out how much you spend. This will help you figure out how much money you have to pay off your debt and to save for an emergency fund. • Find a way to cut a few expenses. The money you spend on your morning coffee can add up. That money can be used to save and to pay off your debt. • Commit money to debt and to a savings account. Once you know what you have, figure out what you want to pay to each commitment. • Make adjustments. The best part about doing this is that you can change it. Over time, the amount of money you save will grow and, at some point, you may feel that you have enough to cover an emergency. As you pay off your debt, your monthly payments will drop. As these things happen you can put even more money towards your savings and towards your debt. Your debt will drop faster and your savings will grow even more. It is a snowball effect. At some point, if you are able to make the commitment to savings and to paying off debt, you will find yourself free of debt with money saved for a rainy day. At that time you may start to feel you have the financial security that you want and deserve. You will find that you actually do have the money you want to live the life you are dreaming of and can make plans for how you want to spend it. Joy Mali is an active blogger who is fond of writing articles on Bad Credit Loans to encourage people to manage and protect their credit. Follow her on Twitter to know more on how to save while paying down debt.
Related Articles -
emergency fund vs. paying off debt, what a bad credit score is, paying off debt,
| 
