This article is simple advice but so many people don’t follow it.
Pay off your debts first.
What do I mean by this? I often speak to people who say they have cash savings in a savings account but they also have a credit card or a loan.
Then I ask them why don’t they just transfer the savings into the debts since the interest is higher? And they say “oh I don’t want to see my savings go” stupid.
Why keep money in a savings account earning 3% when you can put it into a credit card debt charging 20% or a personal loan charging 10%?
Paying off debt is savings in reverse.
$10,000 in savings earning 3% earns $300 per year
$10,000 in a personal loan charging 10% saves $1000
After one year you are $700 apart. Why wouldn’t you do this?
I understand some people want access to savings. What you need to do is check if the debt you have allows you to redraw. Most credit cards do allow you to and some loans do. So you want to check this and also check if redrawing incurs any additional charges because this will affect your bottom line in the above example. No point saving $700 if you get a redraw fee of half that.
Personally I don’t like debt and always strive to be debt free so I would try to pay it off and then save cash after in the savings account once I have no debts.
Remember my friends; paying off debt is saving in reverse. It’s better than saving!
(The information in this article is general only. I am not qualified to give financial advice. Before making a financial decision you should speak to a qualified professional)