Entries Tagged 'Debt' ↓

The most simplistic, fundamental thing to learn about money - spend less than you earn. As long as you spend less money every month than you earn, you will never go wrong. It’s such a simple concept - I can hear you all saying “well DUH” through the giant tubes of the internet. But the fact is, many many people don’t follow this simple rule. Spending more than you earn every month is a guaranteed way to the poor house, and possibly even bankruptcy. If you’re not tracking your spending each and every month, then there is no better time to start than right now.

Today’s lesson will be a very basic one on prioiritizing debts. Let’s say you have $5000 in credit card debt, you owe $5000 on your car, and you have $5000 remaining on your home equity loan. Which should you pay off first? Many people go straight for the car, because they want to be free of a car payment. This is the worst thing you can do financially. Most credit card debt is 17-19% or even higher, while both your car loan and home equity loan will be at a much lower rate. The smartest course of action is to pay off that credit card first - that way you’ll pay the least amount of interest. Granted, you won’t lose the car payment right away, but at the end of it all, you’ll have more money in the bank.